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bond yields spiking, forcing the Bank of England on Wednesday to pledge to buy however many U.K. In the U.K., meanwhile, Prime Minister Liz Truss defended her plan to cut taxes even though critics said it would worsen inflation.

In Germany, for example, a reading on inflation came in hotter than expected. Investments seen as the most expensive or the riskiest tend to take the hardest hits.Įconomic reports elsewhere around the world also firmed expectations for higher rates coming in the future. Higher interest rates not only invite the possibility of a recession, they also push down on prices for stocks and other investments regardless of what the economy’s doing. But they’re already causing big pain for the housing industry, where the average rate on a 30-year fixed mortgage has more than doubled over the last 12 months to 6.70%. Rate increases have a notoriously long lag time before they hit the broad economy.

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That’s its highest level since 2008, and the wide expectations is for the Fed to hike it by at least another full percentage point by early 2023. The central bank’s benchmark overnight interest rate has already zoomed to a range of 3% to 3.25%, up from basically zero as recently as March. But it also keeps upward pressure on inflation, which gives the Fed more reason to keep rates high. That’s good news for workers in general and an indication layoffs aren’t widespread despite worries about the economy. jobs market bolstered expectations for the Fed to keep raising rates and hold them at high levels for a while, potentially through 2023.įewer workers filed for unemployment benefits last week than economists expected. The yield on the two-year Treasury, which more closely tracks expectations for Fed moves, rose more aggressively to 4.20% from 4.14%.Ī stronger-than-expected report on the U.S. It had been above 3.85% in morning trading. The yield on the 10-year Treasury rose to 3.77% from 3.73% late Wednesday. Stocks fell as Treasury yields climbed and raised the pressure on markets. The selling was widespread Thursday, with more than 90% of stocks in the S&P 500 finishing in the red. That undercuts any investor hopes a weakening economy could convince the Fed to take it easier on interest rates. “The economy doesn’t look to be softening if you look at employment data,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. By doing that, they’re also risking recessions if they go too far. And that means the Federal Reserve and other central banks will likely keep pushing interest rates higher to slow their economies in hopes of pushing down inflation. That hasn’t happened yet, with even more data arriving Thursday showing the opposite. stocks have lost more than 20% of their value this year, analysts say investors will need to see a break from the high inflation that’s swept the world. With one day left in September, the benchmark S&P 500 is down about 8% for the month.įor markets to really turn higher, after U.S. The major indexes are on pace for a weekly loss to wind up what has been a dismal month for Wall Street. The Russell 2000 index of smaller companies dropped 2.4%. The Dow Jones Industrial Average fell 1.5% and the Nasdaq composite lost 2.8%. yields under control led to a global burst of relief among investors. That’s when forceful moves by the Bank of England to get suddenly spiking U.K. The washout erased the index’s gains in a big rally the day before. The S&P 500 fell 2.1%, reaching its lowest level since late 2020.

The Federal Reserve and other central banks will likely keep pushing interest rates higher to slow their economies in hopes of pushing down inflation.

For markets to really turn higher, analysts say investors will need to see a break from the high inflation that’s swept the world.Stocks are back to falling on Wall Street as worries about a possible recession and rising bond yields put the squeeze back on markets.