After the Federal Reserve Bank of New York's president declared that the US central bank should maintain high interest rates for "some time," a recovery in US stocks and Treasuries fizzled.
The tech-heavy Nasdaq 100 lost the day's gains while the S&P 500 dropped 0.3%. Treasury two-year rates, which are more responsive to impending policy changes, remained stable at around 5%, while the benchmark 10-year, whose yields on Thursday reached their highest level since 2007, moved to 4.57%. After New York Fed President John Williams stated that the Fed may have finished rising interest rates but that the central bank should keep them high to bring inflation back to the central bank's 2% target, the dollar recovered losses.
The likelihood of a protracted government shutdown while the United Auto Workers expanded their plans for walkouts to additional Ford Motor Company and General Motors plants further dims hopes for the world's largest economy. With the highest interest rates in 22 years dampened demand in risky assets, US stock benchmarks have struggled to make up lost ground this week, with both measures on track for their first negative quarter in a year.
The largest monthly decline in global bond prices since February is expected. Fears of a more quick rate hike on Wall Street were allayed by more circumspect remarks from other Federal Reserve officials and statistics suggesting inflation is slowing down, but the central bank still has a tight line to walk to prevent a recession.