Global shares fall with oil prices amid concerns about US Fed rate hikes

The S&P 500 and the Nasdaq finished in the red on Friday and oil prices settled lower after US economic data prompted bets that the Federal Reserve would get more aggressive with interest rate hikes to battle stubborn inflation.

Friday’s data showed a year-over-year 0.8% increase in export prices versus expectations for a decline of 0.2%. On Thursday, data showed accelerating monthly producer prices in January and lower-than-expected unemployment benefits claims for last week.

Along with hawkish comments from two Fed officials on Thursday, and Goldman Sachs and Bank of America forecasts for three more Fed rate hikes this year, the data led some investors to start bracing for more tightening, according to Shawn Cruz, head trading strategist at TD Ameritrade in Chicago, reported Reuters.

“The thing that kicked this off yesterday was the producer prices coming in elevated. It means one or two things. Companies are going to pass the costs on to consumers, causing more inflation, or absorb these higher costs, which would result in lower profitability. Either way it’s not good,” said Cruz.

While Fed rate hikes can help curb inflation, the US central bank has less control over import prices.

“That shows that global demand is coming back on line. That might make it a little bit more difficult to bring inflation down,” Cruz said.

Traders have raised their bets on how far they see the Fed hiking in recent sessions, and are now pricing in a peak at around 5.3% in September.

The Dow Jones Industrial Average (.DJI) rose 129.84 points, or 0.39%, to 33,826.69, the S&P 500 (.SPX) lost 11.32 points, or 0.28%, to 4,079.09 and the Nasdaq Composite (.IXIC) dropped 68.56 points, or 0.58%, to 11,787.27.

The pan-European STOXX 600 index (.STOXX) lost 0.20% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) shed 0.38%. Emerging market stocks (.MSCIEF) lost 1.01%.

US Treasury yields eased a bit on Friday after the 10-year yield earlier hit a three-month high, as the market placed greater odds that the Federal would keep interest rates higher for longer in its fight against persistent inflation.

Benchmark 10-year notes were down 3 basis points to 3.813%, from 3.843% late on Thursday. The 2-year note was last was down 0.2 basis points to yield 4.6169%.