# Wall St indexes mixed, Treasury yields tick up as higher rates loom
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-02-28
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Global equities mixed as markets brace for higher rates
Meta Description: Follow the market trends with updates on Wall Street indexes, global equities, and bond yields amid stubborn inflation concerns and central bank rate hikes.
URL: https://financedigest.com/wall-st-indexes-mixed-treasury-yields-tick-up-as-higher-rates-loomhtml

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By Lawrence Delevingne and Samuel Indyk

(Reuters) – Wall Street indexes and global equities were mixed on Tuesday and bonds wrapped up a difficult month with further yield increases, as more evidence of stubborn inflation added to expectations that central banks will keep rates high.

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 there being little respite any time soon from [higher interest rates](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate").

Markets will need to adjust to the Federal Reserve’s message that interest [rates may need to go to higher](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") 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 choppy trading on Tuesday, the Dow Jones Industrial Average fell 0.33%, to 32,781.38, the S&P 500 gained 0.28%, to 3,993.34 and the Nasdaq Composite added 0.55%, to 11,529.73.

U.S. [consumer confidence](https://www.financedigest.com/weary-wall-street-cheers-improved-consumer-confidence.html "Weary Wall Street cheers improved 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](https://www.financedigest.com/still-living-at-home-a-third-of-the-nation-cant-afford-to-rent.html "Still living at home? A third of the nation can’t afford to rent") price index.

Earlier on Tuesday, data showed France’s European Union-harmonised consumer [prices rose to a record](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc-2.html "UK shop price inflation hits record 8% in January: BRC") 7.2% in February, while Spain’s EU-harmonised 12-month inflation stood at 6.1%, up from 5.9% in January and above the 5.5% expectation from analysts polled by Reuters.

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

MSCI’s All-World [index of global](https://www.financedigest.com/2017-global-payroll-complexity-index-reveals.html "2017 Global Payroll Complexity Index Reveals ") shares edged up about 0.1%, still around Friday’s seven-week low. The index is down around 2.6% this month, erasing some of January’s 7.1% gain, when shares rose on expectations that major [central banks](https://www.financedigest.com/central-banks-hike-rates-again-but-a-pause-is-coming.html "Central banks hike rates again, but a pause is coming") 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](https://www.financedigest.com/sp-warns-of-possible-economic-blow-hit-to-japan-inc-from-boj-rate-hike.html "S&P warns of possible economic blow, hit to Japan Inc from BOJ rate hike") will rise further and stay high for longer.

U.S. two-year [Treasury yields](https://www.financedigest.com/wall-street-drops-treasury-yields-gyrate-on-fed-chairman-powells-remarks.html "Wall Street drops, Treasury yields gyrate on Fed Chairman Powell’s remarks"), the most sensitive to shifts in expectations for interest rates, have risen this month to almost 5%. This is their [largest monthly rise for the month of February since](https://www.financedigest.com/first-quarter-dash-for-cash-largest-since-early-2020-bofa.html "First quarter ‘dash for cash’ largest since early 2020 -BofA") 1981, according to Refinitiv data.

[INFLATION BATTLE](https://www.financedigest.com/swiss-national-bank-says-inflation-battle-not-yet-won.html "Swiss National Bank says inflation battle not yet won")

BofA Global Research said in a note on Monday that the [Fed may hike interest rates](https://www.financedigest.com/fed-rates-up-boe-up-ecb-up-stocks-up.html "Fed rates up, BoE up, ECB up, stocks up") to nearly 6%, as strong U.S. consumer demand and a tight labour market would force the central [bank to battle inflation](https://www.financedigest.com/boes-bailey-says-rate-setters-can-put-inflation-before-bank-worries.html "BoE’s Bailey says rate-setters can put inflation before bank worries") for longer.

Fed funds [futures are fully pricing in a 25-bps rate](https://www.financedigest.com/bank-of-england-officials-split-over-future-path-for-rates.html "Bank of England officials split over future path for rates") rise from the Fed next month, with around a 20% chance of a larger 50-bps hike.

It is not just U.S. markets that are reflecting a more sobering [rate outlook](https://www.financedigest.com/stocks-euro-gain-amid-divergent-fed-ecb-rate-hike-outlooks.html "Stocks, euro gain amid divergent Fed, ECB rate hike outlooks"). In Europe, two-year German [bond yields are heading for their largest monthly rise](https://www.financedigest.com/global-equities-gain-as-rising-bond-yields-pressure-gold.html "Global equities gain, as rising bond yields pressure gold") for the month of February since 1991, while two-year UK gilts are heading for their biggest February rise since 2005.

Euro-denominated money markets on Tuesday predicted an [ECB deposit rate](https://www.financedigest.com/morgan-stanley-others-now-forecast-4-peak-for-key-ecb-rate.html "Morgan Stanley, others now forecast 4% peak for key ECB rate") of 3.975% by year-end, from 3.775% on Thursday last week.

ECB Chief Economist Philip Lane told Reuters that euro zone inflation pressures have begun to ease, but the European Central Bank will not end rate [hikes until it is confident price growth is heading back](https://www.financedigest.com/uks-bellway-to-buy-back-shares-hike-social-housing-output.html "UK’s Bellway to buy back shares, hike social housing output") towards 2%.

Preliminary euro area wide consumer price [inflation data for February](https://www.financedigest.com/french-inflation-revised-upwards-in-february-to-7-3-final-figures.html "French inflation revised upwards in February to 7.3% – final figures") is due on Thursday, while investors will get more information on the state of the U.S. economy with U.S. ISM manufacturing and [services survey data](https://www.financedigest.com/can-financial-services-organisations-harness-data-and-bi-to-catch-up-in-the-digitalisation-race.html "Can financial services organisations harness data and BI to catch up in the digitalisation race?  ") for February due on Wednesday and Friday, respectively.

[“Fed officials are waiting for prior tightening of financial conditions to slow](https://www.financedigest.com/dollar-set-for-weekly-loss-amid-expectations-fed-will-slow-hikes.html "Dollar set for weekly loss amid expectations Fed will slow hikes") the U.S. economy, but it is increasingly possible that the maximum drag from tighter financial conditions is behind us,” Citi strategists said in a note.

The U.S. 10-year yield rose 1.6 bps to 3.938%, up more than 50 bps in February, its [biggest monthly jump since](https://www.financedigest.com/dollar-retreats-headed-for-biggest-weekly-loss-since-mid-january-bitcoin-down.html "Dollar retreats, headed for biggest weekly loss since mid-January; bitcoin down") September. Germany’s 10-year yield, the benchmark for the euro area, was virtually flat at 2.647%, its highest [level since July](https://www.financedigest.com/foreign-tourism-to-portugal-surpasses-pre-covid-levels-in-july.html "Foreign tourism to Portugal surpasses pre-COVID levels in July") 2011.

Graphic: [German 10-year yield](https://www.financedigest.com/german-yields-steady-spreads-tighten-after-recent-repricing.html "German yields steady, spreads tighten after recent repricing") https://fingfx.thomsonreuters.com/gfx/mkt/dwvkdzzmlpm/Pasted%20image%201677585005543.png

![](https://onlineworldnews.com/wp-content/uploads/2023/02/Pasted-image-1677585005543.jpg)

In the currency market, sterling was last trading at $1.207, up another 0.1%, having jumped 1% on Monday after Britain struck a new trade [deal with the European Union](https://www.financedigest.com/french-uber-drivers-to-earn-more-than-8-per-ride-after-union-deal.html "French Uber drivers to earn more than  per ride after union deal"), brightening the outlook for the post-Brexit UK economy.

The euro was down 0.17% at $1.059, after rising 0.6% on Monday.

The dollar index, which measures the U.S. currency against a basket of peers, ticked up 0.1%, set to [snap a four-month losing streak](https://www.financedigest.com/ftse-100-snaps-four-day-winning-streak-as-britains-ocado-slumps.html "FTSE 100 snaps four-day winning streak as Britain’s Ocado slumps"), having risen 2.6% in February.

[Oil prices](https://www.financedigest.com/oil-prices-steady-after-u-s-stockpile-swell.html "Oil prices steady after U.S. stockpile swell") rose about 2% on Tuesday, erasing the previous session’s losses, as hopes for a strong economic rebound in China offset worries about U.S. interest [rate hikes](https://www.financedigest.com/uk-economys-unexpected-bounce-spurs-more-boe-rate-hike-talk.html "UK economy’s unexpected bounce spurs more BoE rate hike talk") dragging down consumption in the world’s biggest economy.

U.S. crude rose 2.06% to $77.24 per barrel and Brent was at $83.95, up 1.82% on the day. \[O/R\]

Elsewhere, Chicago wheat futures were hovering near a 17-month low due to rain in parts of the U.S. [winter wheat belt and optimism over a Russia-Ukraine export](https://www.financedigest.com/norway-on-track-for-record-gas-export-will-be-ready-for-winter-gassco-ceo.html "Norway on track for record gas export, will be ready for winter -Gassco CEO") deal. \[GRA/\]

Gold added 0.7% to $1,829 an ounce.

(Reporting by Lawrence Delevingne in Boston, Samuel Indyk and Amanda Cooper in London and Ankur Banerjee in Singapore; Editing by Shounak Dasgupta, Deepa Babington and Ed Osmond)


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