Wall Street tumbles, dollar gains as strong data fuels rate hike fears

NEW YORK, Dec 22 (Reuters) – U.S. shares tumbled and the dollar gained floor on Thursday as strong financial data exacerbated worries that the Federal Reserve’s financial coverage will hover at restrictive ranges for longer than many market contributors might have hoped.

All three main U.S. inventory indexes prolonged their losses as the session progressed, with semiconductor shares and curiosity rate-sensitive megacaps weighing heaviest on the tech-laden Nasdaq.

The sell-off helped bolster the dollar towards a basket of world currencies.

“It’s a flight to safety because investors are becoming increasingly concerned of a recession coming in 2023,” stated Sam Stovall, chief funding strategist of CFRA Research in New York.

Stovall likened hopes of avoiding a recession to a “deflating holiday lawn ornament,” including that “investors have given up on the prospect of a soft landing and now have to decide just how hard the landing will be.”

With the penultimate week of a dire yr drawing to an in depth, hopes of a “Santa Claus rally” within the final days of 2022 are fading as traders put together to shut the e book on the worst yr for the inventory market since 2008, the nadir of the Great Recession.

“2008 was a horrible year,” stated Keith Buchanan, portfolio supervisor at GLOBALT Investments in Atlanta. “That bad market followed you home.”

But in 2022, “there was nowhere to hide, the pain is more widespread,” Buchanan added.

Data launched earlier than the bell confirmed an upward revision to GDP and comparatively low claims for unemployment advantages.

While such data would usually be considered positively, amid the central financial institution’s tightening section it fuels concern that the Fed funds goal rate may rise larger and keep there longer than beforehand anticipated, elevating the potential of an financial contraction.

The Dow Jones Industrial Average (.DJI) fell 589.22 factors, or 1.77%, to 32,787.26; the S&P 500 (.SPX) misplaced 88.1 factors, or 2.27%, to three,790.34 and the Nasdaq Composite (.IXIC) dropped 321.28 factors, or 3%, to 10,388.10.

European shares misplaced floor, reversing an earlier rally to comply with Wall Street decrease as fears of aggressive financial coverage proved contagious.

The pan-European STOXX 600 index (.STOXX) misplaced 0.97% and MSCI’s gauge of shares throughout the globe (.MIWD00000PUS) shed 1.54%.

Emerging market shares rose 0.86%. MSCI’s broadest index of Asia-Pacific shares outdoors Japan (.MIAPJ0000PUS) closed 0.89% larger, whereas Japan’s Nikkei (.N225) rose 0.46%.

Treasury yields bounced from earlier lows as data confirmed the U.S. economic system grew at a sooner tempo than beforehand reported.

Benchmark 10-year notes final rose 4/32 in value to yield 3.6711%, from 3.684% late on Wednesday.

The 30-year bond final rose 10/32 in value to yield 3.7271%, from 3.744% late on Wednesday.

The dollar inched larger as the safe-haven foreign money benefited from a flight to security, amid jitters over long-term restrictive rates of interest.

The dollar index rose 0.38%, with the euro down 0.26% to $1.0575.

The Japanese yen strengthened 0.05% versus the dollar at 132.44 per dollar, whereas Sterling was final buying and selling at $1.2012, down 0.59% on the day.

The upbeat data prompted crude costs to reverse earlier gains, which have been pushed by tightening U.S. shares forward of a extreme winter storm bearing down on a lot of the United States.

U.S. crude fell 1.02% to settle at $77.49 per barrel, whereas Brent settled at $80.98 per barrel, down 1.48% on the day.

Gold tanked in opposition to the dollar’s rise after data underscored U.S. financial resiliency amid the Fed’s battle towards inflation.

Spot gold dropped 1.5% to $1,786.76 an oz..

Reporting by Stephen Culp; Additional Reporting by Naomi Rovnick and Wayne Cole; Editing by Jonathan Oatis and Chizu Nomiyama

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