By Chibuike Ojoh and Alun John
NEW YORK/LONDON (Reuters) – A global bond selloff continued on Wednesday, weighing on Wall Street stocks and supporting the dollar as signs of continued strength in the U.S. economy dampened expectations for deep interest rate cuts in the near term.
The benchmark index rose to 4.73%, its highest level since April 2024, based on Tuesday's rise of 7 basis points. It most recently rose 0.2 basis points to 4.687%.
On Wall Street, the index traded lower during most of the session but ended higher. The Dow Jones index also closed higher, while the Nasdaq index ended lower. Healthcare, materials, consumer staples, real estate and industrial stocks gained. Communications and energy services were the biggest losers.
Bond selling accelerated on Wednesday after a CNN report that US President-elect Donald Trump is considering declaring a national economic emergency to provide legal justification for a series of global tariffs on allies and adversaries.
“Since Trump became president-elect, interest rates have continued to rise,” said Bill Strazzullo, chief market strategist at Bell Curve Trading in Boston. “The issue that got him into the White House is inflation, and when you look at all of his policies, whether it's tariffs or tax cuts or deportations, they're all inflationary.”
The S&P 500 index rose 0.25% to 42,635.20 points, rose 0.16% to 5,918.25 points, and the index fell 0.06% to 19,478.88 points.
European stocks fell, with European stocks falling by 0.2%, and most regional stock exchanges also declined. MSCI's index of worldwide stocks fell 0.12% to 845.95.
European government bond yields rose, with those benchmark German 10-year bonds hitting their highest levels in about six months. The yield on British 10-year Treasury bonds rose more than 11 basis points to 4.82%, the highest level since 2008.
Strong US economic data weighed on US Treasuries in recent weeks, as investors lowered their expectations for interest rate cuts by the Federal Reserve.
Markets are only fully pricing in a 25 basis point rate cut in 2025, and see about a 60% chance for a second.
Investors will be watching Friday's more comprehensive nonfarm payrolls data after Wednesday's data showed a smaller-than-expected increase in private payrolls and unemployment claims.
“The one thing that worries me is that the fires of rising yields tend to reinforce each other, especially in times like these,” said Michael Purvis, CEO and founder of Tallbacken Capital Advisors. “I'm concerned about whether you can buy a 10-year Treasury bond at 5% with zero risk that's a higher yield than the S&P 500, which will raise a lot of asset allocation questions.”
The index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.29% to 109.02, with the euro down 0.23% to $1.0315.
Oil prices were under pressure due to the strength of the dollar and the large increase in US fuel inventories last week. The settlement price fell 89 cents, or 1.16%, to $76.23 per barrel. US West Texas Intermediate crude fell 93 cents, or 1.25 percent, to $73.32.
Gold prices advanced. It rose 0.51% to $2,662.90 an ounce. US contracts settled 0.3% higher at $2,672.40.
“Going into the first quarter that we're in now, regardless of earnings, I think there's a huge risk to stocks if bond yields get to 5%,” said Mark Malek, chief investment officer at SiebertNXT in New York. “Buyers will be a little more conservative. So the people who were pushing the market higher, the supply will weaken.”
