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Stocks rally late, 10-yr U.S. Treasury yield touches 3-yr high

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© Reuters. FILE PHOTO: A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying graphs (top) of Nikkei index outside a brokerage in Tokyo, Japan, March 10, 2022. REUTERS/Kim Kyung-Hoon
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By Caroline Valetkevitch

NEW YORK (Reuters) -Stock indexes declined and benchmark U.S. Treasury yields rose on Thursday as investors digested hawkish signals from the Federal Reserve, and the U.S. dollar index was flat.

Minutes released on Wednesday from the Fed’s March meeting reinforced concerns over inflation and suggested the U.S. central bank’s balance sheet reduction could start next month.

Comments earlier this week by Fed governor Lael Brainard had already fueled expectations of a faster stimulus withdrawal.

St. Louis Fed president James Bullard, a voter this year on the Federal Open Market Committee and a known hawk, added to those views on Thursday, saying the Fed remains behind in its fight against inflation despite increases in mortgage rates and government bond yields.

Yields have jumped along with expectations of faster policy tightening by the Fed and other central banks.

“The Fed has laid out its plans quite clearly so markets can plan knowing what’s ahead,” said Juan Perez, director of trading, at Monex USA in Washington.

The Dow Jones Industrial Average fell 194.56 points, or 0.56%, to 34,301.95, the S&P 500 lost 15.45 points, or 0.34%, to 4,465.7 and the Nasdaq Composite dropped 75.93 points, or 0.55%, to 13,812.89.

The pan-European STOXX 600 index lost 0.18% and MSCI’s gauge of stocks across the globe shed 0.62%.

In the foreign exchange market, the dollar index was little changed after hitting 99.823, the highest since late May 2020.

The euro, meanwhile, hit a one-month trough against the dollar of $1.0865, but was slightly higher on the day.

The dollar index was flat, with the euro up 0.07% to $1.0901.

The euro has been pressured by what ING analysts called a “double threat” from the economic impact of mounting sanctions on Russia and uncertainty about the French election.

France votes on Sunday in the first presidential election round and while incumbent Emmanuel Macron is likely to re-take the presidency, his far-right opponent Marine Le Pen has been closing the gap, opinion polls show.

Ten-year Treasury yields, the benchmark for global borrowing costs, have risen around 20 basis points (bps) this month, adding to a 50 bps surge in March. Shorter-maturity yields, which are more sensitive to interest rate expectations, have risen even more.

Benchmark 10-year notes last fell 10/32 in price to yield 2.6465%, from 2.609% late on Wednesday.

Increasing COVID-19 cases and lockdowns in China sent Shenzen and Hong Kong stocks 1.3% lower.

In energy, U.S. crude fell 1.28% to $94.93 per barrel and Brent was at $99.44, down 1.63% on the day.

Stocks slip, Treasury yields rise as investors digest Fed signals

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