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U.S. stocks struggled for direction early Wednesday after the 10-year Treasury yield – a key economic linchpin – briefly spiked past 4%, hitting a closely watched level for the worst bond sell-off in decades.
The S&P 500 was up a modest 0.1%, while the Dow Jones Industrial Average added 60 points, or around 0.2%. The Nasdaq Composite was off by 0.2%.
Across the Atlantic, the Bank of England said it would carry out temporary purchases of long-dated U.K. government bonds, an emergency intervention to help stabilize its currency.
“Were dysfunction in this market to continue or worsen, there would be a material risk to U.K. financial stability,” BoE officials said in a statement Wednesday morning. “This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”
Sizable moves across fixed income and currency markets were in focus Wednesday morning as central bank and recessionary worries kept investors on edge. On the bond side, the benchmark 10-year Treasury note temporarily topped 4%, the highest level since 2008, before retreating to around 3.8%.
“Long-dated U.S. Treasury price volatility is hitting statistically unusual levels right now, just as it did in June 2022,” DataTrek’s Nicholas Colas said in a morning note. “U.S, equities bottomed in that month once yields stabilized.”
On the corporate front, shares of Apple (AAPL) fell more than 3% at the start of trading after a report the tech giant is backing off plans to increase production of its new iPhones this year after demand for the product failed to meet expectations.
Analysts at Morgan Stanley expressed skepticism over the news, calling reports "more bark than bite," and noting that "the upside from better-than- expected iPhone 14 Pro/Pro Max demand is likely being offset by weaker initial iPhone 14/14 Plus demand does not imply any downside to its iPhone shipment forecast.
Elsewhere, shares of DocuSign (DOCU) bounced 3.5% at the open after the company said it expects to restructure and reduce its workforce by approximately 9%.
Biogen (BIIB) stock surged roughly 40% on Wednesday after a successful trial of its experimental Alzheimer's drug. News that the test slowed the progress of Alzheimer's by 27% compared to a placebo in a clinical experiment also buoyed shares of pharma peers like Eli Lilly (LLY), which rose more than 7%.
Some Wall Street giants have turned more bearish on stocks, flagging the risk of a global recession as central banks take the most aggressive monetary action in decades.
Strategists at BlackRock’s (BLK) Investment Institute said that policymakers were downplaying the extent of economic pain needed to rapidly reduce inflation.
“Markets haven’t priced that so we shun most stocks,” a team led by Jean Boivin said in a note earlier this week.
Goldman Sachs (GS), Wall Street’s premier investment bank, cut equities to underweight in its global allocation over the next three months, citing rising real yields as a headwind.
