Sunday, May 22

Yields rise, stocks drop as investors wait for Fed minutes

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NEW YORK — US Treasury yields rose and stock indexes fell sharply on Wednesday ahead of the release of minutes from the Federal Reserve’s last meeting investors will scan for clues on the central bank’s plans to fight inflation.

Fed Governor Lael Brainard said this week she expected a combination of interest rate rises and a rapid balance sheet run-off to take US monetary policy to a “more neutral position” later this year.

In its last meeting, the US central bank raised rates for the first time since 2018 and pivoted from an easy monetary policy to battle the effects of the coronavirus pandemic to a more aggressive stance on fighting inflation.

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The yield on 10-year Treasury notes was up 7.4 basis points at 2.628% while the 2-year note yield was up 2 basis points at 2.524%, leaving the 2-10-year curve at 10.12 basis points, after starting the week inverted .

The Nasdaq was down more than 2%, leading declines on Wall Street.

“The Fed minutes today will likely show an even more hawkish attitude by the Fed members,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

The Dow Jones Industrial Average fell 255.62 points, or 0.74%, to 34,385.56, the S&P 500 lost 59.2 points, or 1.31%, to 4,465.92 and the Nasdaq Composite dropped 374.56 points, or 2.64%, to 13,829.61.

The pan-European STOXX 600 index lost 1.53% and MSCI’s gauge of stocks across the globe shed 1.48%.

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The dollar was flat to slightly higher, retreating from sharp gains the previous session.

The dollar index inched up 0.049%, with the euro up 0.01% to $1.0904.

Oil prices were down after a surprising rise in US crude stocks and news that large consuming nations would also release oil from reserves in conjunction with the United States to counter supply worries.

US crude recently fell 3.04% to $98.86 per barrel and Brent was at $103.73, down 2.73% on the day.

In Asia, Hong Kong’s Hang Seng index lost 1.8% on its return from a holiday, moving away from a one-month high reached on Monday, Chinese blue chips lost 0.3%.

Japan’s Nikkei shed 1.6%, while the MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 1.3%.

(Additional reporting by Huw Jones in London and Bansari Mayur Kamdar and Praveen Paramasivam in Bengaluru; Editing by Alexander Smith, David Holmes and Emelia Sithole-Matarise)