Stocks tumble, US Treasury yields fall after US economy pulls back

  • US GDP fell 0.9% in the second quarter for a second consecutive decline
  • 10-Year U.S. Treasury Yields Fall, Dollar Rises
  • Wall Street up, European stocks up
  • GDP data follows Fed’s 75 basis point rate hike

NEW YORK, July 28 (Reuters) – Wall Street trading was choppy on Thursday as 10-year Treasury yields fell and the dollar rose as investors digested data showing that the US economy contracted for a second consecutive quarter, one day after the federal government. The reserve raised interest rates.

U.S. gross domestic product GDP in the second quarter fell at an annualized rate of 0.9%, the Commerce Department said in its preliminary GDP estimate. That compares with expectations for a 0.5% rate by economists polled by Reuters and follows a 1.6% contraction in the first quarter. Read more

This follows the Fed’s pledge on Wednesday not to flinch in its battle with the most intense US inflation since the 1980s, even if it means an “extended period” of economic weakness and a slowing US market. ‘use. Read more

Join now for FREE unlimited access to Reuters.com

Register

U.S. stocks had rebounded strongly on Wednesday as comments from Fed Chairman Jerome Powell prompted bets that rate hikes would start to slow and some traders were anticipating rate cuts in 2023.

Peter Cardillo, chief market economist at Spartan Capital Securities in New York, called the GDP data disappointing but noted the market had already priced in a recession.

“Will this change the course of the Fed? Probably not,” he said. “(The inventory drag) tells you that companies are very worried and are cutting back on spending. It’s part of an atmosphere of recession.

Wall Street indices oscillated between positive and negative territory. The Dow Jones Industrial Average (.DJI) rose 28.23 points, or 0.09%, to 32,225.82, the S&P 500 (.SPX) gained 6.32 points, or 0.16%, to 4,029.93 and the Nasdaq Composite (.IXIC) fell 2.49 points, or 0.02%, to 12,029.93.

The MSCI Global Stock Gauge (.MIWD00000PUS) gained 0.49%.

Although Europe is facing a gas crisis and an expected recession, economists said the pan-European STOXX 600 index (.STOXX) rose 0.81%.

In bond markets, two-year Treasury yields fell further on Thursday after falling below 3% on Wednesday after the Fed meeting.

The spread between two- and 10-year Treasury yields US2US10=RR, considered a signal of recession when the short end is higher than the long end, narrowed on Thursday. The gap narrowed sharply on Wednesday.

Benchmark 10-year notes last rose 15/32 to 2.6777%, down from 2.732% late Wednesday. The 30-year bond last rose 8/32 to 2.9903% from 3.002%.

The 2-year note last rose 6/32 to 2.8824% from 2.972%.

In currencies, the dollar index rose 0.254% although the geenback pared its gains after the GDP data. Meanwhile, the euro fell 0.55% to $1.0146.

“For now, the market is operating on the idea that slowing growth will cause the Fed to blink and we’re entering a recession,” said Mazen Issa, senior FX strategist at TD Securities in New York.

The Japanese yen strengthened 1.43% against the greenback to 134.64 to the dollar, while the pound last traded at $1.2112, down 0.32% on the day. XRF

As the euro faces an energy crisis, the IMF has warned that if Russia is completely cut off from Europe by the end of the year, the region could face zero economic growth the year next. Read more

Russia delivered less gas to Europe this week and warned of further cuts to come, pushing up gas and oil prices around the world.

U.S. crude rose 0.23% to $97.48 a barrel and Brent to $106.74, up 0.11% on the day.

Spot gold added 1.1% to $1,752.43 an ounce.

Join now for FREE unlimited access to Reuters.com

Register

Additional reporting by Marc Jones in London, Karen Brettell in New York, Wayne Cole in Sydney and Sujata Rao in London; Editing by Shounak Dasgupta, Catherine Evans and Barbara Lewis

Our standards: The Thomson Reuters Trust Principles.