U.S. Markets Dip as Fed Signals Rate Hike Concerns

NEW YORK/LONDON, Nov 14 (Reuters) – MSCI‘s global equities gauge declined on Friday, marking a subdued end to the week as Wall Street faced headwinds from climbing U.S. Treasury yields and hawkish comments from Federal Reserve officials.

After a lower opening, the S&P 500 managed to recover much of its earlier losses thanks to bargain hunters, even as major global bourses such as those in Tokyo and Paris closed significantly lower, impacting the UK markets.

Fed officials voiced concerns about inflation, indicating a shift in sentiment about potential interest rate cuts in December. Kansas City Federal Reserve President highlighted the worry over “too hot” inflation exceeding tariff impacts, suggesting dissent regarding rate cuts.

Later, Dallas Federal Reserve President also opposed a December cut after previously voting against the October cut due to high inflation concerns. Following these comments, traders revised their predictions for a rate cut, reducing the likelihood from 66.9% last week to around 46%, according to CME Group data.

Despite the general trend, the tech-focused Nasdaq bounced back from its losses to finish slightly higher as investors appeared to overlook concerns regarding high valuations in this sector. Nvidia, a leader in AI chips, rose by 1.8%, while the smaller cap S&P 600 technology index increased by 0.3%.

Analysts noted that Wall Street’s performance was buoyed by stocks that had previously declined, as Andrew Slimmon from Morgan Stanley explained, “People are conditioned to buy the dip… that’s why the stocks that are working today have been the winners since the low in April.”

Market watchers are preparing for a significant week ahead, including important data from retailers which could offer insights on consumer health and demand in the AI sector. Viktor Shvets of Macquarie Capital commented on the market’s complexity, stating, “There are so many cross currents out there that it can be hard to determine which way things are headed.”

On the Dow Jones Industrial Average, losses amounted to 309.74 points, or 0.65%, ending at 47,147.48, but it showed a 0.3% gain for the week. The S&P 500 fell 3.38 points, or 0.05%, to 6,734.11 with a weekly gain of 0.1%, and the Nasdaq Composite rose 30.23 points, or 0.13%, to 22,900.59, concluding the week with a roughly 0.5% loss.

MSCI’s global equities gauge fell 4.37 points, or 0.44%, to 995.79, reflecting a 0.4% weekly gain.

Earlier, the pan-European STOXX 600 and FTSEurofirst 300 indices both closed down approximately 1%. In Asia, before Wall Street’s opening, the broadest gauge of Asian shares outside Japan ended down 1.5%.

U.S. Treasury yields rose after earlier declines, with the 10-year note yield climbing 3.5 basis points to 4.146%, while the 2-year note yield increased 1.9 basis points to 3.608%.

The dollar steadied against the euro and remained flat against the yen as stock prices partially recovered. The dollar index against major currencies rose to 99.26, while the euro decreased to $1.1622.

In cryptocurrencies, bitcoin dropped by 3.93% to $94,920.96, and Ethereum fell 0.49% to $3,164.35. Oil prices rose, with U.S. crude settling up $1.40 at $60.09 per barrel, and Brent oil up $1.38 at $64.39 per barrel.

Gold, however, faced a decline, with spot gold down 2.12% to $4,082.76 an ounce. U.S. gold futures also fell by 2.4% to $4,086.50 an ounce.