Wall Street slips, dollar gains on British pound and yen

Investors seem to be focusing again on the surge in US inflation on Friday, October 14

Shares on Wall Street closed sharply lower on Friday, October 14, as investors worried about inflation and rising interest rates as the dollar rose against the yen and the pound after the dismissal by the British Prime Minister of his finance minister.

The pound fell sharply after Britain’s Liz Truss sacked finance chief Kwasi Kwarteng and scrapped parts of her economic program, prompting an uproar in financial markets. The dollar also continued to climb against Japan’s beleaguered yen, hitting a new 32-year high at 148.86.

Oil stabilized sharply lower as recession concerns translated into demand concerns.

On the US Treasuries side, benchmark 10-year yields gained ground after data showed US retail sales remained unexpectedly flat in September as high inflation dampened demand and investors continuing to bet on aggressive rate hikes from the Federal Reserve.

The third quarter earnings season in the United States started on a positive note with shares of JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup rising after their reports.

But as the session progressed, the declines in equities deepened, with oil prices dragging energy stocks down sharply and consumer stocks down sharply. Buyers were reluctant to step in after the big rally on Thursday, October 13, according to Mona Mahajan, senior investment strategist at Edward Jones.

As traders stepped in to hedge bearish bets on Thursday despite stronger-than-expected inflation data, Mahajan noted stocks fell Friday after a University of Michigan survey showed rising inflation expectations. ‘inflation.

“We are starting to look very carefully at the inflation data again. The Fed monitors inflation expectations. They certainly don’t want inflation expectations to become entrenched in consumer sentiment,” said Mahajan, who also noted signs of fear in the market as the CBOE Volatility Index remained above 30. .

Even though Wall Street rallied on Thursday despite soaring inflation data, investors appeared to backtrack on the data on Friday, according to Anthony Saglimbene, chief market strategist at Ameriprise Financial.

“The narrative that we’ve seen a spike in inflation is not yet clear and that’s depressing the market,” Saglimbene said, also pointing to the UK news.

“Yesterday there was speculation that Truss and the UK government would roll back some of these tax plans and they did. Now the markets are selling on the news and the news we have at the moment is not good. »

The Dow Jones Industrial Average fell 403.89 points, or 1.34%, to 29,634.83, the S&P 500 lost 86.84 points, or 2.37%, to 3,583.07, and the Nasdaq Composite fell 327.76 points, or 3.08%, to 10,321.39.

The pan-European STOXX 600 index rose 0.56% and the MSCI gauge of stocks across the world lost 1.30%.

Emerging market stocks rose 1.03% as Latin American currencies fell on the strength of the dollar.

The pound last traded at $1.1171, down 1.39%, after falling to $1.1149.

Friday was due to be the last day of the Bank of England’s bond-buying program put in place to stabilize markets in government bonds, or gilts, after investors were spooked by unpaid tax cuts. funded announced in a “mini-budget” last month.

Investors appeared to have little confidence in the Prime Minister’s position or the likelihood that his decisions on Friday could restore Britain’s credibility in financial markets.

The euro fell 0.55% to $0.9719 while the Japanese yen weakened 0.99% to 148.68 to the dollar.

Japanese Finance Minister Shunichi Suzuki on Thursday reiterated the government’s willingness to take action against excessive currency volatility.

In U.S. Treasuries, yields edged higher as investors continued to digest Thursday’s searing U.S. inflation and looked to interest rates to stay higher for longer as the Fed’s key rate potential edged closer. by 5%.

Yields on the benchmark 10-year note rose 7.1 basis points to 4.025%, from 3.954% on Thursday evening.

Oil prices fell more than 3% as fears of a global recession and weak demand for oil, particularly in China, outweighed support from a sharp reduction in the oil target. OPEC+ supply.

US crude settled 3.93% at $85.61 a barrel and Brent ended at $91.63, down 3.1% on the day.

Gold prices fell 1.4% as the dollar appreciated while silver fell 3.3% to $18.24 an ounce, in its eighth straight daily decline. – Rappler.com

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