Wall Street fell as investors took a breather yesterday after a record day, while the dollar strengthened on positive US data and growing expectations the Federal Reserve will raise interest rates this month.
Federal Reserve Governor Lael Brainard said late on Wednesday that an improving global economy and a solid US recovery meant it would be “appropriate soon” to raise rates.
The comments followed hawkish statements from two central bankers earlier in the week. Fed Chair Janet Yellen is due to speak on the economic outlook in Chicago today.
On top of this, data yesterday showed the number of Americans filing for unemployment benefits fell to near a 44-year-low last week, pointing to further tightening of the labour market.
“We’ve had this great run of data in the US and the expectation on a March rate move has gone up,” Steven Englander, global head of foreign exchange strategy at Citigroup in New York.
Federal fund futures prices suggest markets now see a 75 per cent chance of a 25 basis point hike in March up from 66 per cent on Wednesday and from 35 per cent on Tuesday, according to CME Group’s FedWatch tool.
At 10:38 a.m. ET, the Dow Jones Industrial Average was down 17.21 points, or 0.08 per cent, to 21,098.34, the S&P 500 had lost 6.98 points, or 0.29 per cent, to 2,388.98 and the Nasdaq Composite had dropped 19.73 points, or 0.33 per cent, to 5,884.30.
The FTSEurofirst 300 index rose 0.12 per cent but MSCI’s global stocks index was down 0.2 per cent after touching another intraday record high.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.05 per cent, while Japan’s Nikkei closed up 0.9 per cent, after hitting a 14-month high, as a weaker yen helped exporters.
The dollar index, which measures the greenback against a basket of six major currencies, was up 0.3 per cent, at seven-week highs.
The dollar has strengthened even as many analysts see limited further gains for the currency due to worries about the impact of higher rates as well as a stronger dollar on global growth.
The greenback was last up 0.64 per cent against the Japanese yen at 114.43, the highest since February 15, while the euro fell 0.3 per cent to $1.0516.
In fixed income markets, US Treasury yields pushed higher on the prospect of higher rates. US two-year yields extended their climb and hit their highest since August 2009 of 1.32 per cent while three-year yield hit a nearly 11-week high of 1.598 per cent. The 10-yr yield hit a two-week high of 2.49 per cent.
Oil prices fell for a third consecutive day after a record build-up in US crude inventories and data showing Russian oil production was unchanged last month.
Brent crude fell 1.6 per cent to $55.46 a barrel while US crude was down 1.6 per cent at $52.97.
The dollar put metals prices under pressure. Copper fell 1.3 per cent to $5,941 a tonne while gold fell 0.6 per cent to $1,240.66 an ounce.