As the Fed’s hawkish statements subside, stock price declines become more serious: The market has come full circle

(Bloomberg) — Treasuries and stocks fell as traders speculated that central banks would continue to raise interest rates to curb inflation. The dollar hit its highest since March as investors sought safety.

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The S&P 500 and tech-heavy Nasdaq 100 widened losses as traders returned to their desks after Wall Street’s worst weekly decline since March. In individual action, Netflix Inc.’s stock price in the film and television production giant rose 1% after striking Hollywood screenwriters tentatively agreed to a new collective bargaining agreement. In contrast, Foot Locker Inc. and Nike Inc. fell after Jefferies analysts downgraded their stock prices, citing looming consumer headwinds.

The yield on the 10-year U.S. Treasury note rose 9 basis points to 4.53%, its highest level since 2007. The Bloomberg Dollar Spot Index rose for the fourth day in a row, nearing its highest level this year.

The central bank’s decision last week raised concerns among traders that rising oil prices risk fueling inflation, making it difficult for policymakers to cut interest rates anytime soon. Hedge funds have increased their exposure to oil, betting that tight supply will stimulate demand.

Chicago Fed President Austan Goolsby said there was still a chance the U.S. would avoid a recession. “I’ve been calling this the golden path, and I think it’s possible, but there are a lot of risks and it’s a long and winding road,” he said in an interview with CNBC.

Two Fed officials said last week that at least one more rate hike is possible and that borrowing costs may need to remain high for an extended period of time to get inflation back to its 2% target. Boston Fed President Susan Collins said further tightening was “never off the table,” while President Michelle Bowman suggested multiple rate hikes would likely be necessary.

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Bond markets are beginning to believe in increased ECB long-term commitments

High oil prices and large budget deficits are fueling losses on government debt, pushing U.S. Treasury yields across the maturity curve to their highest levels in more than a decade. The 10-year U.S. Treasury yield could rise to 4.75% before falling towards the end of the year due to softer risk sentiment and tighter financial conditions, Bank of America strategists said.

Meanwhile, China Evergrande Group’s decision to cancel a creditors’ meeting highlighted new signs of concern for the Chinese property developer, raising concerns about its debt mountain. As China’s economic engine stalls, there are growing concerns that global economic growth will stall.

This week’s main events:

• Minneapolis Fed President Neel Kashkari, Q&A on Monday

• ECB’s François Villeroy de Galhau speaks on monetary policy on Monday

• U.S. New Home Sales, Conference Board Consumer Confidence, Tuesday

• ECB’s Philip Lane speaks on monetary policy on Tuesday

• China’s industrial profits Wednesday

• US Durable Goods Wednesday

• Eurozone economic confidence, consumer confidence, Thursday

• U.S. new jobless claims, GDP, Thursday

• On Thursday, Federal Reserve Chairman Jerome Powell will meet with educators at a town hall, while Richmond Fed President Tom Barkin and Chicago Fed President Austan Goolsby will speak.

• Eurozone CPI, Friday

• Japan’s unemployment rate, industrial production, retail sales, Tokyo CPI, Friday

• US Consumer Expenditures, Wholesale Inventories, University of Michigan Consumer Sentiment, Friday

• ECB President Christine Lagarde speaks on Friday

• New York Fed President John Williams speaks on Friday

The main movements in the market are:

stock

• As of 9:36 a.m. New York time, the S&P 500 was down 0.3%.

• Nasdaq 100 fell 0.4%

• The Dow Jones Industrial Average fell 0.2%.

• Stoxx European 600 drops 1.1%

• MSCI World Index falls 0.6%

currency

• Bloomberg Dollar Spot Index rose 0.4%

• The euro fell 0.5% to $1.0602.

• The British pound fell 0.3% to $1.2203.

• The Japanese yen fell 0.3% to 148.80 yen to the dollar.

cryptocurrency

• Bitcoin fell 1.4% to $26,122.13.

• Ether fell 1.1% to $1,573.05.

bond

• The 10-year Treasury yield rose 9 basis points to 4.52%.

• Germany’s 10-year bond yield rose 7 basis points to 2.81%.

• The UK 10-year bond yield rose 7 basis points to 4.32%.

merchandise

• West Texas Intermediate crude rose 0.3% to $90.30 per barrel.

• Gold futures fell 0.1% to $1,943.40 an ounce.

This article was produced in partnership with Bloomberg Automation.

–With assistance from Alex Nicholson, Constantine Courcoulas, and Krystof Chamonikolas.

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