Stocks fall, U.S. yields rise after Fed officials focus on taper timeline

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By Chibuike Oguh

NEW YORK (Reuters) – Global equity markets slipped while U.S. Treasury yields rose to two-week highs on Thursday after two hawkish Federal Reserve officials called for the U.S. central bank to start ending its bond-buying program ahead of a key speech by Fed Chair Jerome Powell.

Dallas Fed President Robert Kaplan said on Thursday it is still his view that the Fed in September would announce a plan for tapering to start in October or shortly thereafter.

His remarks followed comments by St. Louis Fed President James Bullard, who said the bank is “coalescing” around a plan to begin reducing its $120 billion in monthly bond purchases.

Powell is due to speak on Friday at the Federal Reserve’s annual Jackson Hole, Wyoming, policy symposium, which is being held virtually due to the spread of coronavirus cases in the region.

Minutes from the Fed’s July meeting released last week showed that the bulk of the bank’s policy-setting committee expect the Fed will start tapering its bond purchases later this year, though consumer sentiment and economic data have weakened since that meeting.

Following Kaplan and Bullard’s comments, benchmark 10-year Treasury note yields were at 1.3593%, the highest since Aug. 12.

“You’re going to see continued commentary around deciding when to start tapering. I think they want to have that digested by the market so it’s not a surprise when it begins later this year,” said Ryan Jacob, chief investment officer at Jacob Asset Management.

The MSCI world equity index, which tracks shares in 50 countries, was down 0.27%, while the pan-European STOXX 600 index fell 0.32%.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.65%.

On Wall Street, all three major indexes were trading lower in early afternoon, with stocks in consumer discretionary, technology, financials and consumer staples among the biggest losers.

“Trading is very thin today, so it doesn’t take much to move the market,” Jacob said.

The Dow Jones Industrial Average fell 0.15% to 35,353.56, the S&P 500 lost 0.22% to 4,486.23 and the Nasdaq Composite dropped 0.15% to 15,019.20.

The U.S. dollar jumped from one-week lows after Kaplan and Bullard’s comments on bond tapering, pushing the greenback toward a key resistance level.

The dollar index, which measures the greenback against a basket of six major trading currencies, was up 0.2% in afternoon trading.

Gold prices stabilized after a sharp retreat on Thursday, taking a firmer dollar in its stride as investors looked forward to the Fed’s stance on tapering of its economic support at the Jackson Hole symposium.

Spot gold rose 0.1% to $1,792.16 per ounce. U.S. gold futures were up 0.2% at $1,794.10.

Oil fell 1% on Thursday as renewed concerns about demand due to rising COVID-19 infections cut short a three-day rally, and as Mexico restored some oil production after a fire disrupted supplies.

Brent crude was down 0.48% at $71.90 a barrel. U.S. West Texas Intermediate oil fell 0.48% to $65.03 a barrel.

Stocks fall, U.S. yields rise after Fed officials focus on taper timeline

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