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Stocks go down, yields go up; Worries about economic slowdown rise

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  • Wall Street stocks end lower
  • Dollar down vs yen
  • Oil prices on the rise

NEW YORK, Jan 19 (Reuters) – Global equities tumbled on Thursday and benchmark U.S. 10-year Treasury yields rebounded from four-month lows as concerns mounted that a Aggressive stance by central banks could lead the global economy into a slowdown.

Wall Street stocks closed lower on recession worries, while European stocks posted their biggest daily drop of the year and a global stock index posted a third straight day of declines.

Investors are concerned that the US Federal Reserve could “enter a downturn environment,” said Ross Mayfield, an investment strategy analyst at Baird.

“This week the sentiment has become a little riskier,” he said. “Recession fears have started to take center stage.”

A US report showed that the number of Americans filing new claims for unemployment benefits unexpectedly dropped last week, pointing to another month of solid job growth and continued tightening in the job market.

The Fed will likely need to raise interest rates to “a little above” 5% and hold there for a while, Boston Fed President Susan Collins said. Other Fed officials also suggested the need for a tough stance to fight inflation.

Earlier, European Central Bank President Christine Lagarde slightly raised euro zone bond yields as she told the World Economic Forum in Davos that the bank would stay the course with rate hikes.

The Dow Jones Industrial Average (.DJI) was down 252.4 points, or 0.76%, to 33,044.56, the S&P 500 (.SPX) lost 30.01 points, or 0.76%, to 3,898.85 and the Nasdaq Composite (.IXIC) was down 104.74 points, or 0.96%, to 10,852.27.

The pan-European STOXX 600 index (.STOXX) lost 1.55% and the MSCI stock index worldwide (.MIWD00000PUS) was down 0.94%.

Investors digested more quarterly earnings reports. Procter & Gamble (PG.N) raised its full-year sales forecast and said it plans to keep raising prices.

Additionally, Netflix (NFLX.O) stock was up more than 6% in after-hours trading. Co-founder Reed Hastings announced that he will step down as chief executive, while the company also reported quarterly results.

Benchmark 10-year US Treasury yields have breached four-month lows as they approach a technically important level and the recent rally in bonds looks overdone in the short term.

The 10-year yield stood at 3.397% after falling to 3.321%, the lowest since Sept. 13. The 200-day moving average was 3.292%. Yields fell from 3.905% at the end of the year and from a 15-year high of 4.338% on Oct.

In currency markets, the dollar was down 0.4% in afternoon trade against the yen to hit 128.455 yen, a day after the Bank of Japan’s decision to maintain its ultra-loose monetary policy.

In other data, overall US home starts fell 1.4% to a rate of 1.382 million units last month. Building permits fell 1.6% to a pace of 1.330 million units.

The US government has hit its $31.4 trillion borrowing limit, with the Republican-controlled House of Representatives deadlocked with President Joe Biden’s Democrats over raising the cap. Failure to resolve the issue could lead to a fiscal crisis in a few months.

Treasury Secretary Janet Yellen informed congressional leaders that her department had begun to use extraordinary cash management measures that could prevent defaults by June 5.

Strong world inventories start in 2023

In the energy market, oil prices rose 1%, extending a recent rally amid rising Chinese demand.

Brent crude futures gained $1.18, or 1.4%, to settle at $86.16 a barrel, while US West Texas Intermediate (WTI) crude futures were up 85 cents, or 1.1%, to US$80.33 per barrel. Those were the highest closing levels for both contracts since Dec.

Caroline Valetkevitch in New York; reporting by Caroline; additional reporting by Gertrude Chavez-Dreyfuss in New York and Marc Jones in London; editing by John Stonestreet, Alex Richardson and David Gregorio

Our Standards: Thomson Reuters Trust Principles.