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Bond yields tumble as Netflix fuels stock market sell-off

Published 01/20/2022, 09:16 PM
Updated 01/21/2022, 04:41 PM
© Reuters. FILE PHOTO: A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, stands in front of an electric board showing Nikkei index outside a brokerage in Tokyo, Japan January 21, 2021. REUTERS/Kim Kyung-Hoon

By Herbert Lash and Tommy Wilkes

NEW YORK/LONDON (Reuters) -Risk aversion dominated markets on Friday as stocks slumped on Wall Street and in Europe, oil prices fell from seven-year highs earlier in the week and bond prices surged with traders scurrying for the relative safety of government debt.

Poor subscriber growth reported late Thursday at Netflix Inc (NASDAQ:NFLX) sent its shares plunging 21.8% and cast a pall over a market already shaken by concerns the Federal Reserve will tighten monetary policy too aggressively to fight inflation.

Investors are waiting for details from the Fed's policy meeting next week on how it will proceed at a time that inflation is such a hot political issue it could force a more hawkish stance.

Data, however, won't begin to show an expected slower pace of rising consumer prices for at least a few months, making Fed Chair Jerome Powell's job more difficult as he tries to calm markets.

"We know the Fed is beginning to pivot and the problem is that the inflation numbers are not going to start to trend lower until later this spring," said Andrew Slimmon, a managing director at Morgan Stanley (NYSE:MS) Investment Management.

Despite the negative Netflix earnings, it's too early to know whether corporate fundamentals won't continue to be strong, he said.

In Europe, the German, French and Italian indices fell almost 2%, with the broad Euro STOXX index of 600 leading regional companies closing down 1.84%. MSCI's all-country world index fell 1.74%.

On Wall Street, the Dow Jones Industrial Average slid 1.30%, the S&P 500 fell 1.89% and the Nasdaq Composite lost 2.72%. Both the S&P 500 and the Nasdaq posted their biggest weekly declines since the market crashed in March 2020.

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With the Fed posed to hike interest rates as many as four times this year, fear of a hard landing has risen among investors. But a slowing economy in the months ahead will probably give the Fed second thoughts, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC.

"By the time we get to the second rate hike, everything will be rolling over enough that everybody will back off from these calls," he said. "The growth numbers will be slowing much more quickly than the Fed anticipated."

U.S. Treasury and euro zone government bond yields fell as concerns about potential conflict in Ukraine also dented risk appetite and stock market drops increased demand for the debt.

The yield on 10-year Treasury notes fell 7.2 basis points to 1.762%, a sharp drop from a two-year high of 1.902% touched on Wednesday.

Markets overnight in Asia were broadly lower, including in China where benchmark mortgage rates were cut on Thursday in the latest move to prop up an economy soured by its property sector.

The U.S. dollar edged lower with U.S. Treasury yields, with investors looking to next week's Fed meeting for more clarity on the outlook for rate hikes and quantitative tightening.

The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.138% to 95.627. The yen was last down 0.40% at $113.6300. The euro was last up 0.30 percent at $1.1344,

Oil prices slid for a second day, pressured by an unexpected rise in U.S. crude and fuel inventories while investors took profits after global oil benchmarks touched seven-year highs.

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Brent crude futures fell 49 cents, or 0.6%, to settle at $87.89 a barrel, while U.S. futures settled down 41 cents at $85.14 a barrel.

Gold was set to gain for a second week as inflation and geopolitical risks lifted its safe-haven appeal, but it slipped on Friday amid a broader decline in commodities.

U.S. gold futures settled down 0.6% at $1,831.80 an ounce.

Latest comments

I'm not sure inflation will keep being high for long, but what do I know? Money has been printed not only during the covid area, but during 12 years. Once all that money is cashed out, it might be reinjected in the economy, keeping the inflation high, but I don't see people rushing to buy a house more than now, especially with higher rates, nor there can be much more oil consumed, nor food. China should ease restrictions because they have a huge cost on their economy, and thus on our prices. They already started to lower the rates.
Panicking manipulators
"the Fed is no longer your friend" green light for shorting against America?
"throw the stock market under the bus to stamp out inflation" how destroying the market helps to stop inflation lol??
this is good as it hurts all speculators, think meme stocks, crypto, etc. Then capital will find itself back in the market but in efficient good quality companies. do your research.
 this is dumb to believe that it hurts speculators because speculators know how to short and make money during any trend.
stocks tumble realizing we have 3 more years of Biden
That’s because everyone in the USA has spent all their feel good money on new throw away junk from china, jacked up trucks and overpriced homes. They can’t afford the 30% higher prices over last year this time. Oh, by the way, greedy CEOs are still making $500-$7000 an hour salary plus benefits and laughing all the way to the airport, where they’ll hop on their private aircraft and fly off to one of their tax deductible vacation homes.
Terrible education system and constant corporate brainwashing. That's america for ya.
terrible and super expensive
so we gonna fall before each fomc meeting no matter what decision should be made?
yep junky reaction to the prospect of less medecine.i do not think fed will fold on this kind of light pullback...
just like the market bought ahead of every session when Powell was super dovish...and yes i think he folds to external pressure see Trumps pressuring him to prevent corrections
tofu economy is about to go bye bye
so many trolls making illiterate statements....
She is referring to herself, just look at her posts in the comments
Stock maket is not for investing anymore its a bigest scam in the world
I just invested $300,000 in nvidia i will get double up in 12 mos
 so intelligent
 LMAO, what is your average price for NV?
actually the article should read....Asian markets sell off after hedge funds create mass sell offs for no reason.
Why does it matter?
the picture show's the nikkei index with +233, which contradicts the title saying "asian markets fall"
exactly. red means a good day in Asia market. 🤦
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