- Tesla earnings are weighing on stocks
- Bond yields are falling
- US initial jobless claims rise
SINGAPORE, April 20 (Reuters) – A gauge of global equities slipped for a second straight day on Thursday after a sharp decline in Tesla shares weighed on it, while weaker US economic data and growing concerns over the debt ceiling weighed on government bond yields let lower.
On Wall Street, shares of Tesla (TSLA.O) fell 10.28% after the electric vehicle maker missed gross margin guidance and promised further price cuts.
The drop put Tesla shares on course for their biggest daily percentage drop since Jan. 3 as the biggest detractor for the S&P 500 index, dragging the S&P consumer staples sector (.SPLRCD) 1.46% as the worst of the 11 major S&P sectors down .
Economic data showed that weekly jobless claims rose last week, suggesting the job market is beginning to show signs of slowing as the lagging effect of several Federal Reserve rate hikes kicks in.
In addition, a measure of manufacturing activity in the Mid-Atlantic region fell to its lowest level in three years in April, while existing home sales fell in March and the Conference Board said its Leading Economic Index fell 1.2% to its lowest level has fallen since November 2020.
unemployment claims
Following the data, Cleveland Federal Reserve Chair Loretta Mester said the central bank has more rate hikes ahead, with the benchmark interest rate rising by over 5%.
Mester’s comments come after Federal Reserve Bank of New York President John Williams said late Wednesday that inflation levels remain problematic and the central bank will act to bring it down.
“Economic data is slowing down, the job market which was the last really strong pillar there is showing some signs of softness lately. We are now headfirst into gains that may be better than feared but not good enough to sustain this rally,” said Jason Ware, chief investment officer for Albion Financial Group in Salt Lake City, Utah.
“Everyone is just holding their breath here after quite a strong move since mid-March.”
The Dow Jones Industrial Average (.DJI) fell 60.94 points, or 0.18%, to 33,836.07; the S&P 500 (.SPX) lost 16.4 points, or 0.39%, to 4,138.12; and the Nasdaq Composite (.IXIC) fell 59.14 points, or 0.49%, to 12,098.09.
Adding to the slowing economic data and concerns about a rate hike, JP Morgan expects the debt ceiling to become an issue as early as next month and sees a “not inconsiderable risk” of default.
Meanwhile, analysts at JPMorgan said they expected the US debt ceiling to become an issue as early as next month. They also cited a “non-trivial risk” of a technical default on government bonds and joined analysts at Goldman Sachs and Citi in anticipating an earlier deadline for the debt ceiling.
European stocks also lost ground on disappointing earnings reports, while Tesla’s weakness weighed on other automakers.
The pan-European STOXX 600 index (.STOXX) was down 0.15% and the MSCI index of global equities (.MIWD00000PUS) was down 0.25%. The MSCI index was on course for its biggest one-day percentage decline since April 5.
US Treasury yields fell after the data along with worries over Fed rate hike expectations and worries over the rising debt ceiling. According to CME’s FedWatch tool, markets are now pricing an 86 percent chance of a 25 basis point hike in the May 2-3 session, up from 83.3 percent on Wednesday.
Another round of several Fed officials is expected to speak Thursday before a lockdown period begins on April 22 ahead of May’s policy announcement.
The 10-year Treasury yield fell 5.1 basis points to 3.551%.
The US two-year Treasury yield, which normally moves in step with interest rate expectations, fell 7.6 basis points to 4.189%.
In the currency markets, the greenback was lower as the data raised concerns about an impending recession as the dollar index fell 0.176% and the euro rose 0.1% to $1.0965.
The Japanese yen rose 0.31% against the greenback to 134.31 per dollar, while sterling was last traded at $1.2446, up 0.06% on the day.
Despite the dollar’s decline, oil prices were lower on worries about a slowing economy and a surge in US gasoline stocks.
US crude recently fell 2.36% to $77.29 a barrel and Brent was at $81.05, down 2.49% on the day.
Reporting by Ankur Banerjee; Editing by Christopher Cushing
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