Stockbrokers work at the New York Stock Exchange (USA), in a file photograph. EFE/Justin Lane
Wall Street stocks closed in the red again on Thursday amid volatility in the bond market and concerns about further hikes in central bank interest rates.
The Dow Jones Industrial Average closed 1.5% lower, the Nasdaq down 2.8% and the S&P 500 fell 2.1%.
Thursday’s economic reports included data showing a drop in weekly US jobless claims pointing to a strong labor market that is likely to keep the Federal Reserve focused on its current policy of countering inflation.
US stocks, which have fallen for most of the past six weeks, enjoyed a rare bullish day on Wednesday after intervention by the Bank of England pressured bond yields in both the United States and Britain.
But yields were higher in both countries for 10-year bonds as UK Prime Minister Liz Truss doubled down on controversial tax cut policy that has rattled markets.
Markets pulled back after Liz Truss shrugged off criticism and a public call by the International Monetary Fund to scrap tax cut plans. (AP)
European stocks also slumped on Thursday. Shares in Frankfurt fell 1.7 percent, while those in Paris fell 1.5 percent.
Germany was hit by inflation data, which accelerated sharply in September, official data showed on Thursday, in the latest sign that Europe’s largest economy is buckling under pressure from high energy prices.
Consumer prices soared 10.0 percent compared to the same month a year earlier.
German Chancellor Olaf Scholz announced that the nation would invest 200 billion euros to protect homes and businesses from skyrocketing energy costs following the Russian invasion of Ukraine.
London shares fell 1.8 percent as the pound rallied somewhat from earlier declines, a day after the Bank of England snapped up UK bonds to avert a risk to financial stability. from United Kingdom.
Markets pulled back after Truss brushed off criticism and a public call by the International Monetary Fund to scrap plans to cut taxes on high earners. Truss said she is willing to make “tough decisions” to grow the economy.
“The UK government must deliver a credible fiscal plan to complement the BoE’s financial stabilization in a way that supports long-term growth without raising inflation expectations,” Invesco’s David Chao said in a report.
Despite Wednesday’s gain, the S&P 500 is down more than 20% from its Jan. 3 high, putting it in what traders call a bear market.
The 10-year US Treasury yield, or the difference between its market price and the payout if held to maturity, briefly topped 4% on Wednesday, its highest level in a decade.
Investors are increasingly concerned that aggressive interest rate hikes this year by the US Federal Reserve and central banks in Europe and Asia are aimed at cooling inflation that is at multi-decade highs. could push the world economy into a recession.
Investment giant Vanguard estimates the chance of a US recession at 25% this year and 65% next year if the Fed meets expectations that it will raise rates again and keep them elevated until next year.
(with information from AFP and AP)
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