Global stocks decline, Treasury yields jump as investors weigh rate outlook

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., Aug 15, 2023. REUTERS/Brendan McDermid

NEW YORK  – World stock indexes eased and benchmark 10-year Treasury yields rose to their highest in more than a week on Tuesday as oil prices jumped and investors weighed prospects for further U.S. interest rate hikes.

Orders for U.S. factory goods declined less than expected in July, according to data.

At the same time, economic data in China and Europe fueled some worries about slowing global growth.

A private-sector survey on Tuesday showed China’s services activity expanded at the slowest pace in eight months in August as weak demand continued to dog the world’s second-largest economy.

Data from the euro area and Britain also showed a decline in business activity last month, with the dominant services industry in both regions falling into contraction.

“Interest rates are continuing to rise,” and investors are focused on the Federal Reserve’s rate path, said Paul Nolte, market strategist, Murphy & Sylvest Wealth Management in Elmhurst, Illinois.

Investors were also digesting comments on Tuesday from Fed Governor Christopher Waller, who said the latest round of economic data was giving the U.S. central bank space to see if it needs to raise rates again, while noting that he currently sees nothing that would force a move toward boosting the cost of short-term borrowing again.

The Fed has been raising rates to curb inflation.

The Dow led declines among the three major stock indexes on Wall Street, even as higher oil lifted shares of some energy companies.

Oil prices rose to their highest since November after Saudi Arabia and Russia extended their voluntary supply cuts to the end of the year.

The Dow Jones Industrial Average fell 195.74 points, or 0.56 percent, to 34,641.97, the S&P 500 lost 18.94 points, or 0.42 percent, to 4,496.83 and the Nasdaq Composite dropped 10.86 points, or 0.08 percent, to 14,020.95.

The pan-European STOXX 600 index lost 0.23 percent and MSCI’s gauge of stocks across the globe shed 0.60 percent.

In Treasuries, the yield on the benchmark U.S. 10-year Treasury note rose 9 basis points to 4.26 percent after reaching 4.268 percent, its highest level since Aug. 25.

The U.S. dollar rose to a near six-month high against a basket of currencies as the Chinese economic data fueled worries over global growth and pushed investors into the safe-haven U.S. currency.

The Australian dollar fell more than 1 percent and hit a fresh 10-month low after Australia’s central bank earlier on Tuesday kept interest rates steady for a third month.

Brent crude futures rose by $1.04, or 1.2 percent, to settle at $90.04 a barrel, while U.S. crude futures gained $1.14, or 1.3 percent, to settle at $86.69 a barrel.

Spot gold dropped 0.7 percent to $1,925.48 an ounce. U.S. gold futures fell 0.74 percent to $1,925.50 an ounce.