NEW YORK, Dec 21 — US stocks closed higher yesterday in a modest reversal of a four-day sell-off, but the greenback lost altitude and bond yields jumped in the wake of an unexpected policy pivot from the Bank of Japan (BOJ).
All three major US equity indexes rebounded from an early-session dip, while the rising yen sent the dollar lower, and 10-year US Treasury yields touched their highest level this month in reaction to the Japanese central bank’s surprise policy change to allow long-term interest rates to rise.
“Japan has been consistently consistent for many years,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. “The slightest tweak in their policy has investors scratching their heads as to how to interpret that going forward.”
As of Monday’s close, the benchmark S&P 500 had fallen 5 per cent from last Tuesday.
Indeed, the S&P 500, the Dow and the Nasdaq are all on track to notch their biggest annual percentage drops since 2008, the darkest year of the global financial crisis, largely due to persistent inflation and the Fed’s increasingly hawkish battle against it.
“A calibration is happening with regards to the Fed’s language last week, and the market is digesting it,” said Keator, who added that “there’s a lot of work (the Fed has) done this year that will take time to take root.”
“It’s better to pause than to pivot and cut, because the Fed’s been vocal about the fact that it’s not their intention to reverse course anytime soon,” Keator said.
The Dow Jones Industrial Average rose 92.2 points, or 0.28 per cent, to 32,849.74, the S&P 500 gained 3.96 points, or 0.10 per cent, to 3,821.62 and the Nasdaq Composite added 1.08 points, or 0.01 per cent, to 10,547.11.
European stocks were pulled lower by interest rate-sensitive tech and industrial stocks following the BOJ’s announcement that it would allow long-term interest rates to rise, joining its global counterparts in their inflation-taming policy tightening.
The pan-European STOXX 600 index lost 0.40 per cent and MSCI’s gauge of stocks across the globe . gained 0.16 per cent.
Emerging market stocks lost 0.61 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.08 per cent lower, while Japan’s Nikkei lost 2.46 per cent.
US Treasury yields jumped after Japan’s central bank broadened its yield curve control, which prompted a global bond sell-off.
Benchmark 10-year notes last fell 30/32 in price to yield 3.6918 per cent, from 3.583 per cent late on Monday.
The 30-year bond last fell 74/32 in price to yield 3.7466 per cent, from 3.623 per cent late on Monday.
Japan’s surprise policy review sent the yen to a four-month peak against the greenback, and the dollar fell sharply against a basket of currencies.
The dollar index fell 0.69 per cent, with the euro up 0.17 per cent to US$1.0623 (RM4.71).
The Japanese yen strengthened 3.94 per cent versus the greenback at 131.71 per dollar, while the British pound GBP= was last trading at US$1.2178, up 0.26 per cent on the day.
Crude prices forfeited earlier gains on worries that a major US winter storm could persudade millions of Americans to curb their travel plans.
US crude settled up 1.2 per cent at US$76.09 per barrel, while Brent rose 0.24 per cent to settle at US$79.99 on the day.
Gold breached the US$1,800 level on the back of the falling dollar.
Spot gold added 1.7 per cent to US$1,817.55 an ounce. — Reuters
