Stocks open lower on Wall Street, continuing a weak patch
By Joe Mcdonald And Matt Ott, The Associated Press on December 20, 2022.
NEW YORK (AP) – Stocks are opening mostly lower on Wall Street and bond yields are rising globally after the Bank of Japan surprised investors by raising an upper limit for yields on Japanese government bonds. The move, which amounted to an interest rate increase, sent markets lower in Japan and the rest of Asia and the yen rising sharply against the dollar. In the U.S., yields rose sharply on Treasurys. The S&P 500 fell 0.4% in the early going Tuesday and the Nasdaq composite gave back 0.7%. The Dow Jones Indusutrial Average slipped 0.2%. THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below. U.S. futures shifted between small gains and losses early Tuesday after the Bank of Japan surprised investors overnight by expanding caps on its 10-year bond yield. The Bank of Japan did not mention inflation in its policy statement, but said the shift is intended to “improve market functioning and encourage a smoother formation of the entire yield curve, while maintaining accommodative financial conditions.” Analysts interpreted that statement as an acknowledgement from the usually dovish Japanese that fighting inflation there is now a priority. “BoJ’s surprise move allowed it to take a small step away from the extreme dovish side of the monetary policy spectrum, where it had stood alone all year among major central banks,” wrote Jennifer Lee of BMO Economics in a note to clients. “It is not joining the rate-hikers out there, but it is now a tad closer.” Futures for the Dow Jones industrials were essentially flat and futures for the S&P 500 slipped 0.2%. Bond yields rose globally, but stocks fell and the Japanese yen strengthened against the U.S. dollar. The Bank of Japan said that it would allow the yield curve on the Japanese Government Bond to range 50 basis points either side of its 0% target, up from the previous cap of 25 basis points. Tuesday’s policy change will allow market interest rates to edge higher. Japan had been a holdout among major industrialized nations in allowing yields to rise. Central banks in Europe and the U.S. have been hiking rates aggressively to battle inflation. The central bank introduced the previous caps on to control its yield curve in September 2016, hoping to lift inflation closer to its 2% target after a long stretch of economic malaise and stagnant inflation. The Nikkei 225 in Tokyo tumbled 2.5% to 26,568.03 after the policy change announcement. The Shanghai Composite Index lost 1.1% to 3,073.76 after the World Bank cut its forecast of China’s economic growth this year to 2.7% from its June outlook of 4.3%. The bank cited repeated shutdowns of major cities to fight COVID-19 outbreaks. The Hang Seng in Hong Kong sank 1.3% to 19,094.80 and the Kospi in Seoul lost 0.8% to 2,333.29. Sydney’s S&P-ASX 200 fell 1.5% to 7,024.03 while India’s Sensex gained 0.8% to 61,806.19. New Zealand and Southeast Asian markets retreated. In midday trading in Europe, the FTSE in London inched up 0.1%, the DAX in Frankfurt and the CAC 40 in Paris each slipped 0.3% after being down more than a full 1% earlier. Markets have been beaten back in recent weeks and broadly for most of the year as central banks around the world continue to raise interest rates. “The tone in markets reflects a cloudy outlook for the global economy,” Anderson Alves of ActivTrades said in a report. On Monday, the S&P 500 fell 0.9% for its fifth daily decline as communications services stocks, technology companies and retailers retreated. The index is sliding after the Fed said last week that rates might have to stay elevated longer than previously forecast. It is down about 20% this year with less than two weeks left in 2022. The Dow Jones Industrial Average fell 0.5%. The Nasdaq composite lost 1.5%. The Fed boosted its short-term lending rate last week by one-half percentage point in its seventh increase this year. That dashed investor hopes the U.S. central bank might ease off rate hike plans due to data showing economic activity cooling. The federal funds rate stands at a 15-year high of 4.25% to 4.5%. The Fed forecast that it will reach a range of 5% to 5.25% by the end of 2023. The forecast doesn’t call for a cut before 2024. Investors are looking ahead to U.S. economic reports this week for an update on the path of inflation. It has declined from its 9.1% high in June but still stood at 7.1% in November. The National Association of Realtors reports November home sales on Wednesday. Also Wednesday, the Conference Board releases its consumer confidence report for December. On Friday, the U.S. government will report November consumer spending. The report is watched by the Fed as a barometer of inflation. In energy markets, benchmark U.S. crude picked up 77 cents to $75.96 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the price basis for international oil trading, rose 47 cents to $80.27 per barrel in London. The dollar declined to 132.47 yen from Monday’s 136.99 yen. The euro gained to $1.0613 from $1.0604. – – McDonald reported from Beijing; Ott reported from Washington. 31-30
