Bond scares drive muted Wall Street open, investors look to Powell
By Suzanne Barlyn
New York (Reuters) - Worries about lofty U.S. bond yields hit global shares on Thursday and Wall Street’s open was tepid as investors waited to see if Federal Reserve Chair Jerome Powell would address concerns about a rapid rise in long-term borrowing costs.
The specter of high U.S. bond yields also undermined low-yielding, safe-haven assets, such as the yen, the Swiss franc and gold.
Benchmark 10-year notes last rose 1/32 in price to yield 1.4671%, from 1.47% late on Wednesday. They earlier touched their highest levels since a one-year high of 1.614% set last week on bets on a strong economic recovery aided by government stimulus and progress in vaccination programs.
“Investors want to know whether the spike above 1.5% was just a short-term blip, or is that the beginning of new trend higher,” said Sam Stovall, chief investment strategist at CFRA in New York.
Investors are looking to Powell’s upcoming remarks “to find out if there will be any adjustment in his tone to indicate that ‘well, maybe we are paying closer attention to the interest rates and inflation,” Stovall said.
The Dow Jones Industrial Average rose 37.6 points, or 0.12%, to 31,307.69, the S&P 500 gained 2.03 points, or 0.05%, to 3,821.75 and the Nasdaq Composite dropped 21.04 points, or 0.16%, to 12,976.72.
The pan-European STOXX 600 index lost 0.36% and MSCI’s gauge of stocks across the globe shed 0.55%, its third day of losses.
Emerging market stocks lost 1.95%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 2.18% lower, while Japan’s Nikkei lost 2.13% to its lowest since Feb. 5.
The number of Americans filing for jobless benefits rose last week, likely boosted by brutal winter storms in the densely populated South, though the labor market outlook is improving amid declining new COVID-19 cases.
The crucial monthly payrolls report is expected on Friday.
But the market is focused on Powell, who is due to speak at a Wall Street Journal conference at 12:05 p.m. EST (1705 GMT), in what will be his last outing before the Fed’s policy-making committee convenes March 16-17.
Many Fed officials have downplayed the rise in Treasury yields in recent days, although Fed Governor Lael Brainard on Tuesday acknowledged that concerns over the possibility a rapid rise in yields could dampen economic activity.
In addition, anxiety is building over a pending regulatory change in a rule called the supplementary leverage ratio, or SLR, which could make it more costly for banks to hold bonds.
Currency investors continued to snap up dollars as they bet on the U.S. economy outperforming its peers in the developed world in coming months. [FRX/]
The dollar index rose 0.046%, with the euro down 0.25% to $1.2032.
The Japanese yen weakened 0.52% versus the greenback at 107.57 per dollar, roughly a seven month high, while Sterling was last trading at $1.3994, up 0.29% on the day.
Other safe-haven currencies were weakened, with the Swiss franc dropping to a five-month low against the dollar and a 20-month trough versus the euro.
The Swedish crown fell 0.17% versus the greenback at 8.43 per dollar.
Buoyed by lower U.S. Treasury yields, Spot gold added 0.5% to $1,719.04 an ounce, but still near a nine-month low.
Investor focus on a U.S. economic rebound was unshaken by data released overnight that showed the labor market struggling in February, when private payrolls rose less than expected.
Oil prices rose for a second straight session on Thursday, as the possibility that OPEC+ producers might decide against increasing output at a key meeting later in the day underpinned a drop in U.S. fuel inventories. [O/R]
U.S. crude recently rose 2.53% to $62.83 per barrel and Brent was at $65.84, up 2.76% on the day.
(Reporting by Suzanne Barlyn, Editing by Nick Zieminski)