Wall Street sells shares, Treasuries to end fraught February

Wall Street indexes and global equities slid further on Tuesday, and bonds wrapped up a difficult month by holding their elevated yields, as more evidence of stubborn inflation added to expectations that central banks will keep rates high, Reuters reported.

The optimism that drove shares up and global bond yields down in January has ebbed this month, as data from around the world has pointed to economies and labour markets facing little in the way of strain from high inflation.

The concern now is less about a global recession and more over the prospect of little respite any time soon from higher interest rates.

“Markets will need to adjust to the Federal Reserve’s message that interest rates may need to go to higher levels and stay there for a longer period of time,” Wells Fargo Investment Institute’s Douglas Beath wrote in a note on Tuesday, adding that stock market volatility is likely in the near term.

In mixed trading on Tuesday, the Dow Jones Industrial Average ended down 0.71% at 32,656.7, the S&P 500 lost 0.30% to 3,970.15 and the Nasdaq Composite dropped 0.1% to 11,455.54.

U.S. consumer confidence declined again in February, according to the Conference Board, while U.S. single-family home prices in December increased at their slowest pace since the summer of 2020, per the S&P CoreLogic Case Shiller national home price index.

Earlier on Tuesday, data showed France’s European Union-harmonised consumer prices rose to a record 7.2% in February, while Spain’s EU-harmonised 12-month inflation stood at 6.1%, up from 5.9% in January.

The pan-European STOXX 600 index fell 0.3%, although it finished February up 1.74%, its fourth positive month in five.

MSCI’s All-World index of global shares edged down about 0.2% on Tuesday, ending the month down around 3% and erasing a large chunk of January’s 7% gain, when shares rose on expectations that major central banks were close to the end of their tightening cycle.

Since then, a slew of U.S. and euro area economic data has reinforced the view that interest rates will rise further and stay high for longer.

U.S. two-year Treasury yields, the most sensitive to shifts in expectations for interest rates, have risen this month to almost 5%, up another 2.5 basis points on Tuesday. This is their largest monthly rise for February since 1981, according to Refinitiv data.