(Bloomberg) — The rapid slide in US stocks that followed a weak $42 billion sale of Treasuries underscored the fragility of global financial markets in the wake of historic volatility.
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After an equity surge driven by the Bank of Japan’s dovish signals, the S&P 500 wiped out its gains. Investors shunned the 10-year US bond auction, which drew a yield that was well above the pre-sale indicative level. The weaker-than-expected demand signaled the recent rally may have run its course. Treasuries also came under pressure as 17 blue-chip companies offered $31.8 billion of debt, the highest amount of US investment-grade issuance this year.
At Nationwide, Mark Hackett says the events of the past week have been a “masterclass” in how emotions can dominate the movement in markets.
“Stocks remain vulnerable,” said Fawad Razaqzada at City Index and Forex.com. “More evidence of a bottom is needed to excite the bulls again. Overall, sentiment remained cagey. Not many people were confident to buy this latest dip, especially with US CPI looming next week.”
Following a gain of almost 2% earlier in the session, the S&P 500 closed 0.8% lower. Nvidia Corp. led losses in megacaps. Super Micro Computer Inc. tumbled 20% on disappointing earnings. In late trading, Warner Bros. Discovery Inc., the parent of CNN and TNT, plunged after posting a charge of $9.1 billion as it wrote down the value of its traditional TV networks.
Treasury 10-year yields rose six basis points to 3.95%. The Japanese yen fell about 2% after the BOJ signaled it would be cautious about raising interest rates. That also eased pressure on currencies that had been hammered as investors abandoned yen-funded bets on riskier assets. Mexico’s peso rallied.
Just like several other market observers, Peter Boockvar said Wednesday’s 10-year Treasury auction was “terrible.”
“I still think there is a good chance that long-term rates stay higher for a while and for not all good reason, aka, debts and deficits finally matter and foreigners are not much of a help anymore,” said the…
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