NEW YORK: Wall Street tumbled on Thursday, pressured by a jump in US treasury yields after data signaling a resilient labour market fanned fears the Federal Reserve could keep interest rates higher for a longer period.
Private payrolls increased more than expected in June, the ADP National Employment report showed, indicating the labour market remained strong despite growing risks of a recession from higher interest rates.
The yield on the benchmark 10-year US treasury note , an indicator of interest rate expectations, rose following the data, while that on the two-year Treasury note hit the highest since June 2007.
A separate report showed job openings, an indicator of labour demand, dropped in May, but remained elevated despite 500 basis points worth of rate hikes by the Fed.
“The market is seeing that there’s no real relief from the job market in terms of the Fed needing to pause rate hikes again in (July),” said David Russell, vice president of market intelligence at TradeStation.
“The Fed doesn’t have to worry about employment now and so can fully deal head-on with inflation.” US interest rate futures saw an increased probability of another rate hike by the Federal Reserve in November, with traders factoring in a 47% chance in mid-day trading, compared with 36% the day before, according to CME’s FedWatch.
Dallas Fed President Lorie Logan, a voting member of the Fed’s rate-setting committee, said on Thursday “it would have been entirely appropriate” to raise rates at the June policy meeting itself.
Wall Street closed lower on Wednesday after Fed minutes showed a vast majority of the policymakers expected further policy tightening, even as they agreed to hold rates steady in June.
At 12:02 p.m. ET, the Dow Jones Industrial Average was down 449.43 points, or 1.31%, at 33,839.21, the S&P 500 was down 49.55 points, or 1.11%, at 4,397.27, and the Nasdaq Composite was down 174.97 points, or 1.27%, at 13,616.68.
US bank stocks fell and the KBW Regional Banking Index hit a near two-week low amid lingering worries about the health of the lenders in the aftermath of the crisis in regional banks and ahead of second-quarter results that start next week.
Meta Platforms slipped 0.2%, but still outperformed peers after the Facebook-parent took an aim at Twitter with its Threads app that attracted millions of users within hours of its launch on Wednesday.
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