A nascent rise in U.S. equities faded Wednesday afternoon, with a drop in oil prices weighed on energy stocks that dragged on equity indices.
The S&P 500 index gave up early gains to become negative in the last 30 minutes of trading in New York, and ended 0.1 percent lower during the day. Energy companies such as Marathon Oil and ConocoPhillips fell sharply as Brent crude fell 2.5% to $ 111.74 a barrel.
The high-tech Nasdaq Composite stock index also fell 0.1% and remains nearly 30% lower during the year.
The falls put an end to a two-day rise in the S&P, which this year has fallen in a bearish market amid concerns that the Federal Reserve’s push to raise interest rates will cause an economic slowdown.
Fed Chairman Jay Powell told the U.S. Senate Banking Committee on Wednesday that “the U.S. economy is very strong and well positioned to handle tighter monetary policy.” But he also warned of new surprises from inflationary trends. He said a recession was “definitely a possibility”.
Last week, the Fed raised its key interest rate by 0.75 percentage points, the highest since 1994, after U.S. consumer price inflation hit a 40-year high in May.
Money markets imply the Fed will raise its key fund rate by about 3.5 percent this year, and investors worry that the combination of rising inflation and higher borrowing costs threatens corporate profits and economic growth. The annual rate of US consumer price inflation rose to 8.6% last month after the Russian invasion of Ukraine helped raise energy and food prices.
On Thursday, the closely watched purchasing managers ‘indices produced by S&P Global, which includes executives’ answers to questions on topics such as entry costs and order volumes, are expected to show that business activity has slowed in both the US and the eurozone.
“We are looking for manufacturing and services PMIs to provide more signs of weakening,” TD Securities analysts said in a note to clients.
The yield on the 10-year U.S. Treasury bill, which moves inversely to its price and sustains the price of the global debt, fell 0.12 percentage points to 3.16 percent as demand for the low-risk asset. Bond prices rise as yields fall.
British gold yields fell 0.15 percentage points to 2.50 per cent, after data showed British inflation rose to 9.1 per cent last month, raising fears of a recession .
In Europe, the Stoxx 600 stock index fell 0.7%. An FTSE Asia-Pacific stock index outside of Japan fell 2 percent, while the Tokyo Topix closed 0.2 percent higher.
The Japanese yen fell to a 24-year low of 136.71 yen against the dollar, as traders opted for the Bank of Japan to keep borrowing costs very low, defying the global trend.
Additional report by Harriet Clarfelt
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