NEW YORK, Jan 19 ― Benchmark US Treasury yields jumped to two-year highs and equity markets tumbled yesterday, with the Nasdaq falling more than 2 per cent, as traders braced for the Federal Reserve to tackle fast-rising inflation by tightening monetary policy.
Two-year Treasury yields, which track short-term interest rate expectations, rose above 1 per cent for the first time since February 2020 as traders priced in a more hawkish Fed before the US central bank's policy meeting next week. The yield on two-year Treasuries rose 8.4 basis points to 1.051 per cent and on 10-year Treasury notes they climbed 10.2 basis points to 1.874 per cent, a yield last seen that high in early January 2020.
Tech stocks also weighed the most in Europe, falling 2.2 per cent, as European shares fell to their lowest level in more than a week. The pan-European STOXX 600 index fell as much as 1.44 per cent before paring some losses to close down 0.97 per cent. On Wall Street, the Dow Jones Industrial Average slid 1.51 per cent, the S&P 500 fell 1.84 per cent and the Nasdaq Composite slipped 2.60 per cent to close almost 10 per cent below its record closing high on November 19, which would confirm a correction.
Big market declines often occur in years following outsized gains on Wall Street, with nine sell-offs starting in the first quarter that averaged 10.9 per cent since World War Two, said Sam Stovall, chief investment strategist at CFRA Research.Oil was the only positive sector on Wall Street as Brent crude prices hit US$88 a barrel after Yemen's Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition.