NEW YORK – Global equity fell further on Thursday, unable to hold a late rally on Wall Street as investors dropped stocks for fear of slower growth and bought safe-haven assets such as government debt and the Swiss franc.
Supply chain problems continue to fuel inflation and growth concerns as Cisco Systems Inc. continues to warn of component shortages, with its shares falling 13.7%. Immersion this week has made it the latest big-name stock to post the biggest fall in more than a decade.
The data showed that factory output in the US Mid-Atlantic region fell far more than expected in May and the six-month business outlook was the weakest in more than 13 years, according to a regional Federal Reserve Bank study.
Some Megacap growth stocks that have performed less this year have posted gains but the rally has faded. The Dow Jones Industrial Average lost 0.75%, the S&P 500 lost 0.58% and the Nasdaq Composite lost 0.26%.
Michael James, managing director of equity trading at Wedbush Securities, said the big slide for Walmart on Tuesday and the target on Wednesday disappointed investors who were surprised by the rising costs across the supply chain.
“The combination of these two has been a serious blow to the system for portfolio managers,” James said. “Such damage is difficult to repair, given that technology investors have piled on top of that extremely challenging year,” he said.
But James said he sees these markets as over-selling and “you’re responsible for some kind of bounce.”
Traders are looking for a catalyst that could turn the market downward in the near term, said Rick McLarer, president of Hedge Fund Libertyview Capital Management LLC.
But, “there is probably enough fear among investors to see some more downdrafts,” he said.
According to Lewis Dudley, a portfolio manager at Federated Hermes Limited, cash hoardings have peaked since September 2001, indicating strong bearish sentiment.
Goldman Sachs estimates a 35% chance of a U.S. recession over the next two years, with Morgan Stanley seeing a 25% chance of becoming one in the next 12 months.
U.S. spot power and natural gas prices have peaked for more than a year in some parts of the United States as Americans crank air conditioners during the spring heatwave.
Worldwide, MSCI’s stock fell 0.65% and the Pan-European STOXX 600 Index lost 1.37%.
The S&P 500 fell nearly 18% from its record close on January 3, and the MSCI index has fallen similarly since peaking on January 4.
Germany’s 10-year bond yield fell below 1% and U.S. Treasury yields fell as softer US economic data raised concerns that the Federal Reserve’s aggressive monetary austerity measures could hurt the global economy.
Yields on the 10-year Treasury note fell 3.8 basis points to 2.846%, after hitting a three-week low of 2.772%.
The dollar has fallen across the board, falling further from a two-decade high, as other major currencies have attracted buyers.
The dollar index fell 0.896%, the euro rose 1.11% to 0 1.0582. The Japanese yen has strengthened from 0.35% to 127.79 against the dollar.
The Swiss franc gained after Swiss National Bank President Thomas Jordan on Wednesday signaled that the SNB was ready to work if inflationary pressures continued.
Central banks are on a hard path trying to recover from decades of high inflation without causing a painful recession.
“We need to discuss what we can do together in our respective responsibilities to avoid stagnation,” said German Finance Minister Christian Lindner during a two-day meeting of top central bankers near the forest.
Oil prices rose from a two-day loss in a volatile session, bolstered by the weakness of the dollar and expectations that China could ease some lockdown restrictions that could boost demand.
US crude futures rose $ 2.62 to settle at 2 112.21 a barrel. Brent rose 2. 2.93 to settle at 2 112.04 a barrel.
U.S. gold futures rose 1.4% to settle at 8 1,841.20 an ounce, as a weaker dollar and Treasury yields burned the bullion’s safe haven appeal.
(Reporting by Herbert Lash, additional reporting by Mark Jones in London, Francesco Canepa in Koenigswinter, Germany, Stella Kew in Beijing and Alun John in Hong Kong; editing by Bernadette Baum, David Gregorio and Richard Pulin)