Wall Street reverses gears on surging interest rates

Michael Pistillo Brandon Barb

Wall Street reverses gears on surging interest rates

After big moves higher and lower, USA stocks are surging Tuesday afternoon, raising hopes for an end to a global sell-off. The Nasdaq Composite Index was down 63.90 points, or 0.90 percent, to 7,051.98.

Japan's Nikkei stock index closed down almost 4.7 percent Tuesday, recovering from a 7 percent plunge earlier in the day. The Dow Jones Industrial Average closed at 24,893.35 for a loss of -19.42 points or -0.08%.

Tom Martin, senior portfolio manager with Globalt Investments, said he didn't see anything specific moving the market lower today, just a continuation of a shift in investor mindset from fear of missing out in a rising market to worry of clocking big losses in a market that's turned.

Torsten Slok, chief global economist at Deutsche Bank, told the Financial Times: "Markets are coming to the conclusion that the US economy is close to overheating and therefore that the risks of inflation are bigger than the risks of a recession".

The negative close on Wednesday and the wild session on Tuesday began after indexes were put under pressure on the back of a rise in the 10-year Treasury yield sparked renewed concerns which triggered the sell-off.

That following a surprise late rally on Wall Street last night that saw the Dow jump by 567 points - its biggest gain since Donald Trump was elected United States president.

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Despite the big swings, Tuesday's trading looked similar to the patterns that have shaped the market for the previous year: investors bought retailers like Amazon and Home Depot and technology and industrial companies and banks, which do better when economic growth is strong.

The volatility in the stock market over recent days did not change the outlook for the US economy or central bank policy, two senior Federal Reserve officials said on Wednesday.

Even so, one couldn't blame investors for forgetting this trend, as the market didn't drop more than 3 percent on a single day all past year.

"The primary culprit was higher-than-expected wage growth in the January jobs report, which may have increased fears that the Federal Reserve would be more aggressive with interest rate hikes in 2018", according to LPL.

After a sharp loss Wednesday, benchmark US crude lost 64 cents, or 1 per cent, to $61.15 a barrel in NY.

The steep declines in Europe and Asia on Tuesday followed a heart-stopping Monday that saw the Dow at one point plunge 1,600 points.

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The pan-European FTSEurofirst 300 index lost 1.89 per cent and MSCI's gauge of stocks across the globe shed 1.26 per cent.

Meanwhile, the sudden cratering of stock prices, rising bond rates and fierce volatility have been a stark reminder that Trump, like his predecessors, isn't commander in chief of the USA economy, the Associated Press explained. Higher rates, in turn, will make bonds and other fixed-income assets relatively more attractive compared with stocks, which are riskier, spelling the end of the 9-year-old bull market.

Oil prices fell to their lowest in six weeks on Thursday after data showed USA crude output had reached record highs and the North Sea's largest crude pipeline reopened following an outage.

CURRENCIES: The dollar edged up to 109.38 yen from 109.33 yen. The yield on the 10-year note was as low as 2.04% as recently as September. Silver rose 10 cents, or 0.6 percent, to $16.34 an ounce, and copper fell a penny to $3.08 a pound. Hong Kong's Hang Seng skidded 5.1 percent and South Korea's Kospi declined 1.5 percent.

Gold slipped as the USA dollar strengthened.

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