2023-07-27 23:40:35
© Reuters. Traders trade on the New York Stock Exchange 7/26/2023 REUTERS/Brendan McDermid
By Carolina Mandl and Herbert Lash
(Reuters) – U.S. stocks closed lower on Thursday after news that the Bank of Japan will allow long-term interest rates to rise boosted Treasury yields, snapping the longest streak of gains. of the index since 1987.
The paper reported that the Japanese central bank will maintain its 0.5% cap on 10-year government bond yields, but will discuss allowing long-term interest rates to rise above that level to some degree. Reuters confirmed that the central bank can make small adjustments to extend the life of its yield control policy.
Higher interest rates in Japan boosted equity yields to more than 4% earlier and reduced the stock’s attractiveness.
The Dow Jones fell 0.67% to 35,282.72 points. The lost 0.64% to 4537.46 points. The Nasdaq technology index fell 0.55% to 14,050.11 points.
On Wednesday, the Federal Reserve raised interest rates by 25 percentage points, as expected. Traders now see just a 20% chance the Fed will surprise with a 0.25 percentage point increase in September.
Fed Chair Jerome Powell said on Wednesday that Fed staff did not predict another US recession, but did not rule out another rate hike, saying the Fed would follow future economic data.
On Thursday, a Commerce Department report showed the US economy grew faster than expected in the last quarter, with a Gross Domestic Product reading of 2.4%, up from the 1.8% forecast for economists polled by Reuters.
Kim Rupert, managing director of global fixed income at Action Economics in San Francisco, said the strong economic data earlier in the day also caused the market to reevaluate its positioning after the Federal Reserve slightly updated its growth outlook on Wednesday.
“Markets are looking at the growing potential of another Fed rate hike that had been largely dismissed. It is now being priced back in,” said Rupert, who expects a Fed rate hike in September.
Strong gains in mega-cap growth stocks have helped it lead Wall Street’s advance so far this year, with the index up about 34%.
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