Wall Street stocks moved lower on Thursday, adding to their losses as sentiment faltered after an optimistic start to the new month.
The S&P 500 fell 0.6 percent in the afternoon in New York after the broad index closed 0.2 percent in the previous session, a decline that put the brakes on the strongest two-day advance for US equities in more than two years. The tech-heavy Nasdaq Composite fell 0.2 percent.
In Europe, the Stoxx 600 lost 0.6 percent after the regional meter closed 1 percent lower on Wednesday.
Shares have been largely sold in recent months, with the longest streak of quarterly losses since the 2008 financial crisis capped last week. As the US Federal Reserve and other central banks twist monetary policy screws to curb inflation, the prospect of rising borrowing costs has hit corporate valuations.
At the same time, fears have grown that the Fed and its colleagues will raise interest rates into a prolonged slowdown, putting demand pressure to the point of triggering a global recession — and increasing the threat to corporate financial health.
Against that background, investors have been closely scrutinizing economic data releases for clues as to how much further rate setters could raise borrowing costs in the face of slowing growth.
A report on Thursday offered new figures on the state of the U.S. unemployment rate, with 219,000 applications coming in for the week ending Oct. 1, ahead of the projected number of 203,000 and above 190,000 a week earlier.
That weaker-than-predicted picture came just after a disappointing release on Tuesday about job openings in the world’s largest economy, which had allayed concerns about rate hikes and, in turn, sparked a rally in Wall Street stocks.
Current market prices reflect expectations that the Fed’s key interest rate will peak at 4.5 percent in March 2023, down from estimates at the end of September of nearly 4.7 percent. The Fed’s current target range is between 3 percent and 3.25 percent after three consecutive extra-large raises of 0.75 percentage points.
The U.S. Labor Department’s widely followed monthly jobs report will be released on Friday. Job market temperatures are seen as a critical influence on Fed decision-making, with signs of easing inspiring hopes that the central bank will act with less vigor to contain inflation.
Government debt markets came under pressure on Thursday after days of sharp swings. The yield on the 10-year US Treasury rose 0.05 percentage point to 3.81 percent, while the policy-sensitive two-year yield rose 0.08 percentage point to 4.23 percent.
The moves were more pronounced in UK bonds, with 10-year government bond yields rising 0.15 percentage points to 4.19 percent as the price fell. The gold market was ravaged by a crisis last week as the new UK government’s ‘mini’ budget raised fears about the size of the loans needed to fund extensive tax cuts.
In currencies, the dollar added 0.9 percent against a basket of six counterparts, extending gains from the previous session. The pound fell 1.3 percent to $1.118 against the greenback, but remained well above the record low of $1,035 it fell to after UK Chancellor Kwasi Kwarteng announced his fiscal plans on Sept. 23.
“[We] think it’s too early to call a peak in Fed hawking behavior or a top in the dollar,” UBS’s Mark Haefele said. “The number of job vacancies in the US remains much higher than the number of unemployed, while the most recent price index for personal consumption expenditure showed that inflation is still high.
“Fed officials, including Chairman Jerome Powell, have emphasized that the central bank’s job is not done yet.”