Stocks ended lower Thursday, triggered in part by another leg higher in Treasury bond yields and disruption in global currency markets.
Stocks had traded firmly higher for much of the session, powered in part by better-than-expected corporate earnings and news of the resignation of embattled British Prime Minister Liz Truss.
Truss, whose position was rendered untenable following a disastrous 'mini-budget' late last month that included $80 billion in new borrowing to fund high income tax cuts, made a brief statement outside Downing Street following a meeting with backbench lawmakers and indicated she would stay on until a successor has been named from a new leadership contest set to begin next week.
The move gave an immediate boost to the pound, which jumped 0.7% to 1.1299 against the dollar, and looks to eliminate at least some broader bond market angst linked to her 45-day tenure in office.
Investors remain wary of risk markets, however, as benchmark 10-year Treasury note yields hit a fresh fourteen year high of 4.203% in Thursday trading amid hawkish comments on rate hikes from Philadelphia Fed President Patrick Harker, extending a sell-off in bonds that began late last week amid concerns over broader market liquidity first raised by Treasury Secretary Janet Yellen.
The sell-off has been coupled with big moves in the currency markets, where Japan's yen fell past the 1.50 mark against the U.S. dollar for the first time since 1990, extending a year-to-date decline of around 33% and inducing more talk of intervention from the Ministry of Finance, which spent around $19 billion trying to boost the yen's value last month.
The collective concerns have sapped investor sentiment heading into the end of the week, while a softer-than-expected revenue gain from Tesla curbed investor enthusiasm.
"Equity markets rolled over yesterday suffering in the headwinds of a fresh strong rise in US treasury yields, as the entire US yield curve lifted to new highs for the cycle," said Saxo Bank strategists. "The rise in yields is pushing hard on the yen to weaken further, but the USD/JPY rate of 150.00 it’s clearly a psychological barrier for official intervention-wary traders."
The S&P 500 ended down 0.80%, while the Dow Jones Industrial Average fell 91 points, or 0.30%, to 30,322. The tech-focused Nasdaq lost 0.61%.
Tesla (TSLA) shares fell 6.7%, extending a six-month decline that has loped more than $350 billion from the world's most valuable carmaker, after it posted softer-than-expected third sales and said full-year deliveries may fall just shy of its 50% growth target.
IBM (IBM) shares gained 4.7% after the software and services group posted stronger-than-expected third quarter earnings and said it would top full-year revenue targets despite an increasing headwind from the surging U.S. dollar.
AT&T (T), meanwhile, surged 7.8% after it delivered stronger-than-expected third quarter earnings and boosted its full-year profit forecast thanks to a big gain in wireless subscribers helped in part by promotional plans linked to Apple (AAPL) iPhones.
In other markets, oil prices jumped in overnight trading following a report that China is prepared to loosen Covid quarantine rules for inbound visitors, a move that could lead to changes in Beijing's 'zero Covid' policy that has tamped industrial demand in the world's biggest energy market.
WTI crude futures were marked 16 cents higher in late afternoon trading at $85.71 per barrel, while Brent contracts fell 16 cents to $92.57 per barrel.
The CBOE group's key volatility gauge eased 1% to30.47 points, suggesting daily swings of around 70 points over the next 30 days for the biggest U.S. benchmark.
In Europe, stocks moved higher by the close of trading, with London's FTSE 100 up 0.27% while the region-wide Stoxx 600 closed 0.26% higher in Frankfurt.
Overnight in Asia, Japan's Nikkei 225 ended 0.92% while the MSCI ex-Japan index fell 0.82% to pull the regional benchmark to its lowest levels in two-and-a-half years.
