US stocks have posted their longest quarterly losing streak since the market crash in 2008, weighed down by central banks’ determination to rein in inflation through higher interest rates.
The blue-chip S&P 500 index fell 1.5 percent on Friday, bringing the loss during the June-September quarter to 5.3 percent. The S&P has now fallen for three consecutive quarters, the most since the prolonged bear market that accompanied the global financial crisis.
The tech-heavy Nasdaq Composite also fell 1.5 percent on Friday, hitting the index’s worst closing level since July 2020 to end the quarter down 4.1 percent.
The sell-off of US assets this week persisted after the Bank of England intervened to calm the turmoil in the UK government bond market.
The year has been a rough one for stocks as central banks, including the US Federal Reserve, have signaled they will stay the course on raising interest rates, reducing support for economic growth, in a effort to contain inflation. Lael Brainard, vice president, on Friday morning re-emphasized this opinionacknowledging that while the Fed was aware of market ups and downs, it remained committed to tighter monetary policy.
Peter Tchir, head of macro strategy at Academy Securities, said investors are accepting the Fed’s dedication to cooling inflation, even if stocks take a hit in the process.
“Today, I think the market is realizing that the economy is slowing down rapidly, but the Fed might not be able to do anything to stop that. With gilt volatility and liquidity deteriorating across US markets, more investors are becoming nervous about the possibility of a large and rapid pullback in stock and bond prices,” Tchir said. .
Emmanuel Cau, head of European equity strategy at Barclays, said: “The central bankers are telling us that they are going to control inflation, that will come in [the] at the expense of the economy, and we don’t care about the markets right now.”
US bonds sold off on Friday but remained above lows hit earlier in the week. Prices plunged last Friday and Monday following the UK’s announcement of £45bn in unfunded tax cuts. UK and US bonds stabilized after the BoE stepped in this week with a new program to buy long-term debt.
The yield on the 10-year US Treasury note, the global benchmark for lending, rose 0.03 percentage point to 3.81 percent after topping 4 percent for the first time since 2010 on Wednesday. as prices fall.
But despite some recovery in Treasury debt since the BoE intervention, the rapid tightening of monetary policy this year has both the two-year note, which is very sensitive to policy expectations, and the 10-year note years, on track for its biggest annual sale. -offs in the registry.
On Friday, the UK 10-year bond yield fell 0.05 percentage point to 4.08 percent. UK yields across all maturities have ranged by record highs in recent sessions, with the 10-year bond rising more than 0.4 percentage point on Monday before falling almost 0.5 percentage point on Wednesday.
Cau said central bankers have been at pains to tell the market that the BoE’s action should not have been seen as the start of a broader return to supportive policy. “The [Federal Reserve] It has been very clear that what the BoE is doing should be seen as an isolated thing, and the Fed is going to stick to its plan. the [European Central Bank] is doing the same thing,” he added.
London’s FTSE 100 rose 0.2 percent on Friday, while Europe’s regional Stoxx 600 rose 1.3 percent.
In Asian stock markets, Japan’s Topix index fell 1.8 percent on Friday. China’s CSI 300 index of shares listed in Shanghai and Shenzhen fell 0.6 percent, while Hong Kong’s Hang Seng added 0.3 percent.
Additional reporting by Hudson Lockett in Hong Kong