US stocks finish lower as Fed official’s dour inflation outlook pushes key bond yields to fresh 14-year highs

• US stocks fell Thursday, stretching their losses into a second consecutive session.
• A “disappointing lack of progress on curtailing inflation” will keep the Fed raising interest rates, said Philadelphia Fed President Patrick Harker.
• IBM and AT&T rose after their earnings reports while Tesla shares dropped.

US stocks fell Thursday, stung by yields that charged higher after a regional Federal Reserve president said more rate hikes are needed to deal with stubborn inflation.

Wall Street’s major averages swung into the red after Philadelphia Federal Reserve President Patrick Harker in a speech said the central bank remains on its path toward further interest-rate increases.

“Given our frankly disappointing lack of progress on curtailing inflation, I expect we will be well above 4% by the end of the year,” he told the Greater Vineland Chamber of Commerce in Vineland, New Jersey.

The Fed has raised rates by 300 basis points so far this year with more hikes expected in November, December and in early 2023.

Investors sold off bonds, propelling the 10-year Treasury yield to 4.23%, a fresh 14-year high. The 2-year yield rose 6 basis points to 4.61%.

“If [Harker’s] correct, inflation will still be well above target and thus it would require policy to remain restrictive, rather than expansionary to offset a potential recession,” Fawad Razaqzada, markets analyst at City Index, said in a note.

Here’s where US indexes stood at the 4:00 p.m. closing bell on Thursday: 

• S&P 500: 3,665.74, down 0.80%

• Dow Jones Industrial Average: 30,333.59, down 0.30% (90.22 points)

• Nasdaq Composite: 10,614.84, down 0.61%

Investors also had more earnings and economic reports to consider. Tech advancers included IBM and AT&T, with the telecom heavyweight surging as much as 10% as its third-quarter profit and revenue beat expectations. But Tesla slumped as the company cut its vehicle delivery target. Analysts had mixed reactions to Tesla’s earnings report while CEO Elon Musk offered a bold prediction, saying the EV maker eventually worth more than Apple and Saudi Aramco combined.

Economic updates were mixed. The Conference Board’s Leading Economic Index signaled a recession with a 0.4% decline in September. Weekly US jobless claims unexpectedly fell to 214,000, compared with an Econoday estimate of 235,000 new filings for unemployment benefits.

Here’s what else is happening today:

• The pound climbed against the dollar after Liz Truss resigned as the UK’s prime minister. Her government’s mini-budget roiled financial markets for weeks, and these three charts illustrate the chaos that ran through markets during the 45 days that Truss was in the leadership role – the shortest term on record.
• Musk said Tesla was considering a share buyback of $5 billion to $10 billion – a signal the company thinks its stock is undervalued.
• The Japanese yen fell to ¥150 against the dollar for the first time in 32 years. The move sets the stage for Japanese officials to intervene in the currency markets again.
• The housing market is in free fall and prices could crash 20% in the next year, Pantheon Macroeconomics said.
• Russian President Vladimir Putin is enlisting Turkey’s help to sell fuel to Europe after his plans to directly sell natural gas to the continent were rebuffed.

In commodities, bonds and crypto: 

• West Texas Intermediate crude rose 0.2% to $85.71 per barrel. Brent crude, the international benchmark, pared its gain to 3 cents at $92.44.
• Gold edged up 20 cents to $1,634.40 per ounce.
• The 10-year Treasury yield rose 8 basis points to 4.22%.
• Bitcoin slipped 0.1% to $19,169.04.

Read the original article on Business Insider