Wall Street steady, Treasury yields hit new highs

  • U.S. stocks mostly hold gains after Thursday rally
  • U.S. 10-year Treasury yields near three year peak
  • Oil prices reverse, add to recent highs
  • Safe-haven gold dips

BOSTON/LONDON, March 25 (Reuters) – Shares on Wall Street mostly steadied on Friday after a tech-driven rally and U.S. Treasury yields rose to fresh heights as markets evaluated a world of elevated interest rates and effects of Russia’s war in Ukraine.

The Dow Jones Industrial Average (.DJI) ticked down 47.83 points, or 0.14%, to 34,660.11 and the S&P 500 (.SPX) lost 12.99 points, or 0.29%, at 4,507.17. The Nasdaq Composite (.IXIC), whose tech shares had driven recent gains, dropped 158.29 points, or 1.12%, to 14,033.55.

MSCI’s gauge of stocks across the globe (.MIWD00000PUS) was down 0.44%, but is likely to notch a second consecutive week of gains for the first time in 2022. The pan-European STOXX 600 index (.STOXX)was flat.

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Share prices have been supported by global flash Purchasing Managers’ Index (PMI) data for March this week showing the world economy was broadly resilient, but the longer term economic outlook is making investors cautious. Barclays, for example, cut its 2022 world economic growth forecast this week to 3.3% while traders have ramped up short bets.

Global bond markets were still in the grips of one of their worst sell-offs in recent memory.

The yield on benchmark 10-year Treasury notes , which have led the broader bond market sell-off, rose 13.4 basis points on Friday to 2.477%, a near three-year peak. Yields have risen more than 75 bps in the past two weeks as traders have scrambled to revise their rate hike expectations.

Chicago Fed President Charles Evans was the latest U.S. policymaker to sound more hawkish, saying on Thursday the Fed needs to raise interest rates “in a timely fashion” this year and in 2023 to curb high inflation before it is embedded in U.S. psychology and becomes even harder to get rid of. read more

Bank of America (BofA) joined a small but growing number of top investment banks calling for more aggressive interest rate increases from the U.S. Federal Reserve against a backdrop of soaring inflation data. The bank now expects two hikes of 50 bps each at its June and July meetings with “risks” of those expectations being pulled forward into May and June respectively. read more

Markets expect U.S. interest rates to rise by as much as 190 basis points in total over the rest of this year, after a 25 bps hike last week. Investors are assigning an approximately 80% probability of a 50 bps rate hike in March. ,

Morgan Stanley market analysts wrote in a note late Thursday that fast Fed action was not overly concerning for the economy.

“While a disorderly tightening of financial conditions remains a risk to the outlook, particularly in areas like credit, our baseline growth outlook remains constructive,” they wrote. “We think (it) helps contain risks that financial conditions become too dislocated in response to the Fed’s actions.”


The broader dollar index was virtually flat but on track for a small weekly gain. The euro edged higher.

“EUR-USD remains quite stuck at around 1.10, with better-than-expected PM (purchasing manager) surveys across the euro zone for March not sufficient to induce buying interest,” UniCredit analysts said.

Demand for safe-haven assets including gold and the Swiss franc remained resilient as the conflict in Ukraine continued. Moscow on Friday signaled scaling back its ambitions in Ukraine to focus on territory claimed by Russian-backed separatists as Ukrainian forces went on the offensive, recapturing land on the outskirts of the capital Kyiv. read more

Spot gold remained elevated at $1,954 an ounce, down about 0.15% on the day GOLD/

Oil prices turned positive on Friday after reports of a missile strike and a fire at Saudi Arabia’s state-run oil company Aramco’s facility.

Brent crude rose $1.20, or 0.7%, to $119.92 a barrel and U.S. West Texas Intermediate (WTI) crude was up $1.04, or 0.9%, to $113.34 after both had dropped more than $3 earlier in the session. Both benchmarks were heading for their first weekly gains in three weeks. read more

The 2-year/10-year Treasury curve inversion has preceded U.S. recessions
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Reporting by Lawrence Delevingne in Boston and Saikat Chatterjee in London; Editing by Susan Fenton and Richard Chang

Our Standards: The Thomson Reuters Trust Principles.

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