A new rally in US stocks faded late on Wednesday as the slide in oil prices weighed on stocks that pulled up the equity indexes.
The S&P 500 Index gave up early gains in the last 30 minutes of trading in New York, turning negative, down 0.1 per day. Energy companies including Marathon Oil and ConocoPhillips Brent crude fell 2.5 percent to $ 111.74 a barrel.
The technology-heavy Nasdaq Composite stock index fell 0.1 percent and fell nearly 30 percent year over year.
The recessions ended a two-day rally for S&P, which fell to the bear market earlier this year, as the Federal Reserve’s push to raise interest rates caused an economic downturn.
Jay Powell, Fed chairman, told the US Senate Banking Committee on Wednesday that “the US economy is too strong and is in a good position to maintain a tight monetary policy.” But they also issued further surprising warnings from inflationary trends. The recession is “definitely a possibility,” he said.
The Fed hiked its main interest rate by 0.75 percentage points last week, the highest since 1994, after US consumer price inflation reached a 40-year high in May.
Money markets indicate that the Fed will raise its core fund rate this year to 3.5 percent, with investors worried that a combination of inflation and high borrowing costs threaten corporate profits and economic growth. The annual pace of US consumer price inflation shot up to 8.6 percent last month, after the Russian invasion of Ukraine helped boost energy and food prices.
On Thursday, the S&P Global-Built Purchasing Managers’ Index – which combines executive responses to questions on issues such as input costs and order volumes – shows that business activity has slowed in both the US and the eurozone.
“We are looking to provide further signs of weakening PMIs in manufacturing and services,” TD Securities analysts said in a note to clients.
The yield on the 10-year US Treasury note is moving inversely, and the underlying price for the global debt has fallen from 0.12 percentage points to 3.16% as demand for low-risk assets increased. Bond prices will rise as yields fall.
Equal yields on UK gilts dropped 0.15 percentage points to 2.50 per cent, after data showed British inflation soared to 9.1 per cent last month, raising fears of a recession.
In Europe, the Stoxx 600 stock index fell 0.7 percent. Outside Japan, the FTSE index of Asia-Pacific shares fell 2 percent and Tokyo’s Topix fell 0.2 percent.
The 24-year low of Japan’s yen fell to ¥ 136.71, as traders waged the Bank of Japan by maintaining very low debt costs against the global trend.
Additional reporting by Harriet Klarfelt