The S&P 500 and other major US indices slipped into the red, with analysts pointing to a poorly received US Treasury bond auction as a catalyst for further selling after Monday’s rout
Wall Street stocks closed lower Wednesday after a rally that lifted European and Asian bourses faded amid unease following recent turbulence.
Major US indices began the session solidly higher following a trend in Paris, Frankfurt, Tokyo and other exchanges as the Bank of Japan issued a dovish signal it will not further raise interest rates amidst market volatility.
But the S&P 500 and other major US indices slipped into the red after midday, with analysts pointing to a poorly received US Treasury bond auction as a catalyst for further selling after Monday’s rout.
This is what happens when you have a big risk-off type of event, Steve Sosnick, of Interactive Brokers, said of Monday’s equity market slump. It is normal to see the market display uncertainty.
Major Wall Street indices slid more than 2.5% on Monday amid concerns over a potential US recession and the unwinding of the so-called carry trade that took advantage of the weak yen prior to last week’s interest rate hike by the BoJ.
Stocks bounced back somewhat on Tuesday, but many analysts expect more effects from the unwinding, extending a period of volatility.
This volatility is typical of more prolonged and chaotic market downturns, which could prompt investors to adopt a cautious stance, hold on tight, and keep the antacids ready, according to independent analyst Stephen Innes.
Bank of Japan deputy governor Shinichi Uchida earlier Wednesday sought to allay fears of further interest rate hikes, indicating that the central bank would not raise them further during a period of high market volatility.
This dovish signal on rates triggered an almost 2% decline in the yen, while the Tokyo stock market closed up 1.2%.
The pull back in the yen “should take some pressure off those still exposed to the yen carry-trade, of which there are still significant numbers,” said Trade Nation analyst David Morrison.
