NEW YORK/ LONDON :MSCI’s global equities gauge was falling while bond yields rose as investors worried that Thursday’s stronger than expected economic data would make the Federal Reserve more cautious about cutting interest rates while they monitored comments from central bank officials for clues on their rate policy path.
The U.S. economy grew faster than previously thought in the second quarter, pumped up by an ebb in imports and a pickup in consumer spending, but momentum appears to have since slowed, according to a report from the Commerce Department’s Bureau of Economic Analysis. Second quarter gross domestic product increased at an upwardly revised 3.8 per cent annualized rate versus initial reports of a 3.3 per cent pace.
New orders for key U.S.-manufactured capital goods unexpectedly increased in August, but a decline in shipments of these goods suggested a moderate pace of growth in business spending on equipment this quarter.
And the Labor Department said on Thursday that the number of Americans filing new applications for unemployment benefits fell by 14,000 to a seasonally adjusted 218,000 for the week ended September 20. Economists polled by Reuters had forecast 235,000 claims for the latest week.
“If you’re looking for continued fuel for equities to move higher and broaden out versus what we’ve seen the last couple of years, you need a continuation of the momentum that’s been built over the summer in terms of the Fed easing and easing materially through 2026,” said Matt Stucky, chief portfolio manager for equities at Northwestern Mutual Wealth Management Company.
Also on Thursday, Fed Bank of Chicago President Austan Goolsbee said that while he supported last week’s interest-rate cut because the labor market is cooling, he was not eager to do a lot more policy easing while inflation is above target and moving the wrong way.
But Fed Governor Stephen Miran said on Fox Business’ Mornings with Maria program that the U.S. economy is more vulnerable to shocks right now due to high interest rates based on unfounded inflation concerns among Federal Reserve policymakers.
And San Francisco Federal Reserve Bank President Mary Daly said on Wednesday she “fully supported” the decision by the Fed to cut its policy rate last week and expects further reductions ahead. But regarding the timing of those cuts she said it was “hard to say.”
On Wall Street, indexes hit a one-week low after the data and the commentary. At 11:10 a.m. the Dow Jones Industrial Average fell 104.08 points, or 0.23 per cent, to 46,015.55, the S&P 500 fell 37.53 points, or 0.56 per cent, to 6,600.98 and the Nasdaq Composite fell 140.18 points, or 0.62 per cent, to 22,357.54.
MSCI’s gauge of stocks across the globe fell 6.34 points, or 0.65 per cent, to 972.91.
The pan-European STOXX 600 index fell 0.56 per cent with med-tech stocks coming under pressure after news of the U.S. opening new import-related probes, and investors focused on Fed commentary.
In government bonds, U.S. Treasury yields rose on Thursday following stronger-than-expected second-quarter economic data that could strengthen the case for a rates pause from the Fed at its October meeting.
The yield on benchmark U.S. 10-year notes rose 4 basis points to 4.187 per cent from 4.147 per cent late on Wednesday while the 30-year bond yield rose 1.2 basis points to 4.7704 per cent.
The two-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 5.9 basis points to 3.657 per cent.
In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.61 per cent to 98.43.
The euro was down 0.58 per cent at $1.1669 while against the Japanese yen, the dollar strengthened 0.5 per cent to 149.65.
Against the Swiss franc, the dollar strengthened 0.7 per cent to 0.801 after the Swiss National Bank held interest rates at zero on Thursday in its first pause since late 2023.
Oil prices fell on Thursday, from the previous session’s seven-week settlement high, as some investors took profits in anticipation of slower winter demand as well as the return of Kurdish supplies.
U.S. crude fell 0.88 per cent to $64.41 a barrel and Brent fell to $68.81 per barrel, down 0.72 per cent on the day.
Safe-haven gold, which has recently been hitting record highs in anticipation of a low-interest-rate environment, took a step back after Thursday’s data.
Spot gold fell 0.12 per cent to $3,731.45 an ounce. U.S. gold futures fell 0.2 per cent to $3,724.70 an ounce.
