US yields scale new heights, tech drop pressures Wall St

NEW YORK/LONDON: Benchmark US Treasury yields hit 14-month peaks on Thursday, putting fresh pressure on technology stocks, as markets reversed some moves from their initial reactions to the Federal Reserve's policy statement a day earlier.

The tech-heavy Nasdaq fell over 1% in morning trading, while MSCI's gauge of stocks across the globe gained 0.01%, supported by European shares as the pan-European STOXX 600 index rose 0.45%.

The dollar rallied, pressuring oil prices and reversing an initial fall following the US central bank's meeting on Wednesday, when the Fed said the US economy is heading for its strongest growth in nearly 40 years as it recovers from the COVID-19 crisis.

Investors said markets were continuing to react to the Fed's meeting and Chairman Jerome Powell's press conference, as the central bank pledged to keep its foot on the gas despite an expected surge of inflation.

"It's all about the Federal Reserve meeting driving the markets today," said Brad Peterson, regional portfolio adviser at Northern Trust Wealth Management.

"While they reassured people that they aren't going to be in any hurry to raise short rates, their comfort with the back-up in rates at the long end of the curve is a bit surprising to people."

On Wall Street, the Dow Jones Industrial Average rose 171.76 points, or 0.52%, to 33,187.13, the S&P 500 lost 13.8 points, or 0.35%, to 3,960.32 and the Nasdaq Composite dropped 181.76 points, or 1.34%, to 13,343.44.

The S&P 500 tech sector slumped more than 1% while financials, which are sensitive to bond yields, were the best-performing group.

The yield on the 10-year US Treasury note rose as high as 1.754%, its highest level since January 2020, leading a worldwide move higher in bond yields.

Benchmark 10-year notes last fell 25/32 in price to yield 1.7277%, from 1.641% late on Wednesday.

"I don't know what the Fed can do to stop a rise in yields that is based on stronger fundamentals," said BCA chief global fixed income strategist Rob Robis, pointing to the $1.9 trillion US coronavirus relief package that will drive growth.

"The path of least resistance is still toward higher yields," he said. "The US Treasury market leads the world and every bond market responds."

Data showed the number of Americans filing new claims for unemployment benefits unexpectedly rose last week, but the labor market is regaining its footing as an acceleration in the pace of vaccinations leads to more businesses reopening.

The US dollar rallied across the board, as higher Treasury yields helped it recoup losses from the previous session.

The dollar index rose 0.474%, with the euro down 0.53% to $1.1914.

Oil prices fell for a fifth day on a stronger dollar, a further increase in US crude and fuel inventories and the weight of the ever-present COVID-19 pandemic.

US crude recently fell 4.02% to $62.00 per barrel and Brent was at $65.44, down 3.76% on the day.