GLOBAL MARKETS-US stocks mixed, Treasury yields dip as investors square soft data with hawkish Fed

BY Reuters | ECONOMIC | 06/13/24 11:25 AM EDT

(Updates to 10:54 EDT)

By Stephen Culp

NEW YORK, June 13 (Reuters) - Wall Street stocks were mixed in choppy trading on Thursday and U.S. Treasury yields touched their lowest since early April as investors reconciled cooler-than-expected inflation data with tempered rate cut expectations from the Federal Reserve.

The dollar edged higher against a basket of world currencies as the Fed's hawkishness and possibility of a Europe-China tariff war sent European stocks sharply lower.

Among the three major U.S. stock indexes, the Nasdaq was buoyed by tech strength, while the S&P 500 inched back from Wednesday's record closing high.

The blue-chip Dow was decisively lower.

The Labor Department's Producer Prices Index (PPI) was significantly lower than analysts had expected, dipping 0.2% on a monthly basis, while rising 2.2% year-on-year, or 20 basis points above the Fed's 2% annual inflation target.

"We're getting further evidence this morning, sort of confirmatory evidence this morning from PPI that we got from CPI yesterday," Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina. "We're seeing continuing progress and investors getting more confident that the Fed is not going to have to leave right at 5.5% forever and ever."

In another report, initial jobless claims touched a 10-month high.

The data followed Wednesday's cooler-than-expected CPI report and the Fed's revised dot plot, which lowered rate cut expectations this year from three to one.

However, expectations that the U.S. central bank could implement its first rate cut as soon as September are on the rise.

Financial markets now see a 61.1% likelihood of a 25-basis-point reduction to the Fed funds target rate in September, according to CME's FedWatch tool.

The Dow Jones Industrial Average fell 249.48 points, or 0.64%, to 38,462.73. The S&P 500 lost 4.78 points, or 0.09%, at 5,416.25 and the Nasdaq Composite added 44.48 points, or 0.25%, at 17,652.91.

European shares fell sharply as investors digested lowered rate cut expectations, political turmoil from recent and upcoming elections, and a possible tariff war against China.

The pan-European STOXX 600 index lost 1.25% and MSCI's gauge of stocks across the globe shed 0.45%.

Emerging market stocks rose 0.64%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.7% higher, while Japan's Nikkei lost 0.40%.

U.S. 10-year Treasury yields dipped after the soft economic data.

Benchmark 10-year notes last rose 5/32 in price to yield 4.2771%, from 4.295% late on Wednesday.

The 30-year bond fell 1/32 in price to yield 4.4519%, versus 4.45% late on Wednesday.

The dollar index rose 0.41%, with the euro down 0.41% to $1.0763.

The Japanese yen weakened 0.17% to 157.00 per dollar, while Sterling was last trading at $1.276, down 0.28% on the day.

Oil prices nudged higher as data suggested price pressures could be easing.

U.S. crude rose 0.19% to $78.65 per barrel and Brent was last at $82.98, up 0.46% on the day.

Gold prices moved lower in opposition to the dollar in following the weaker than expected PPI report.

Spot gold dropped 0.4% to $2,312.79 an ounce.

(Reporting by Stephen Culp; Additional reporting by Marc Jones in London; Editing by Richard Chang)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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