Treasuries rebounded and stocks struggled at the end of a jittery week that saw investors positioning for a higher-for-longer Federal Reserve stance.

Ten-year yields dropped after briefly topping 4.5 per cent for the first time since 2007. The S&P 500 notched its worst week since March. Tech, which bore the brunt of the recent rout, outperformed. Apple Inc. climbed as its latest iPhones and watches went on sale. A gauge of US-listed Chinese shares rallied on news Washington and Beijing are forming working groups to discuss economic and financial issues.

Traders are still very concerned about inflation and the path of policy amid the recent oil rally and the Fed’s signal that rates are not going to come down any time soon, according to Fawad Razaqzada, a market analyst at City Index and Forex.com.

“It is far too early to say the markets have bottomed, as fundamentally nothing has changed,” Razaqzada noted.

Two Fed officials said at least one more rate hike is possible and that borrowing costs may need to stay higher for longer for the central bank to ease inflation back to its 2 per cent target. While Boston Fed President Susan Collins said further tightening “is certainly not off the table,” Governor Michelle Bowman signaled that more than one increase will probably be required, cementing her position as one of the Federal Open Market Committee’s most hawkish members. 

Fed Bank of San Francisco President Mary Daly said she is not ready to declare victory in the fight against inflation, and that the central bank is still committed to curbing price pressures “as gently as possible.”

The yield on 10-year Treasuries could reach 4.75 per cent before softer risk sentiment and tighter financial conditions push it lower into year-end, according to rates strategists at Bank of America Corp. Meantime, strategists at Goldman Sachs Group Inc. said the rates market pricing for about 75 basis points of Fed rate cuts in 2024 may persist “in the near term” based on soft economic data and the latest dot plot.

Investors dumped equities at the fastest pace since December as the prospect of higher-for-longer interest rates raises the risk of a recession, BofA strategists led by led by Michael Hartnett said.

Global equity funds had outflows of US$16.9 billion in the week through Sept. 20, according to a note from the bank citing EPFR Global data. US stock funds led the exodus, while in Europe, redemptions reached 28 weeks.

Corporate Highlights

The United Auto Workers said that it clinched key concessions from Ford Motor Co. and would spare the company more pain even as it expanded the strike to 38 additional facilities run by rivals General Motors Co. and Stellantis NV as of midday Friday.
Microsoft Corp.’s US$69 billion acquisition of Activision Blizzard Inc. looks set to clear its final regulatory hurdle after the UK competition authorities signaled they will accept the latest concessions, ending a wait of more than a year and a half to complete the biggest ever gaming deal.
The Federal Trade Commission is expected to sue Amazon.com Inc. for antitrust violations next week, according to people familiar with the matter – marking the agency’s fourth swipe at the online retail giant this year.
Arm Holdings Plc got a neutral rating at Susquehanna Financial, the latest firm to take a more cautious view of the newly public chip designer.
Nikola Corp. said it’s offering US$40 million of senior convertible notes due in 2024.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.2 per cent as of 4 p.m. New York time
• The Nasdaq 100 was little changed
• The Dow Jones Industrial Average fell 0.3 per cent
• The MSCI World index fell 0.2 per cent

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.1 per cent to US$1.0647
• The British pound fell 0.5 per cent to US$1.2240
• The Japanese yen fell 0.5 per cent to 148.38 per dollar

Cryptocurrencies

• Bitcoin fell 0.2 per cent to US$26,545.68
• Ether rose 0.3 per cent to US$1,592.81

Bonds

• The yield on 10-year Treasuries declined seven basis points to 4.43 per cent
• Germany’s 10-year yield was little changed at 2.74 per cent
• Britain’s 10-year yield declined six basis points to 4.25 per cent

Commodities

• West Texas Intermediate crude rose 0.8 per cent to US$90.33 a barrel
• Gold futures rose 0.3 per cent to US$1,945 an ounce