Stocks and bonds have recovered from the worst of this week's slump, but critical data due out Friday threatens to spark another drop.
US equity indices ended the day heading lower after the most recent data showed weekly unemployment claims remaining around historical lows. The S&P 500 has been hovering above a critical support level that, if broken, may lead to a steeper loss, according to technical analysts. With the index already down around 8% from its July highs, a too-good number from Friday's non-farm payrolls might push rates back higher and equities down.
The yield on the 10-year US Treasury note fell to 4.72% after reaching a 16-year high of roughly 4.88% this week. The 30-year, which had recently reached 5%, climbed to 4.9% in Thursday's session. Wall Street has been focused on rising borrowing costs and saw 5% as a likely target for longer-term US government bonds; however, some money managers are now predicting 6%.
With the US benchmark rate at a 22-year high, Fed speakers emphasised the higher-for-longer message, saying data would be important ahead of the November meeting. Richmond Fed President Barkin, who did not vote this year, stated that the market is returning to a more normal rate seen in previous years. The head of the San Francisco Fed, Daly, who is also a non-voting member, stated that if jobs and prices showed signs of slowing, the central bank might keep rates stable.