Stocks drop, yields up as Fed hawks bash pivot hopes

US stocks and Treasuries slumped as Federal Reserve officials hammered home their resolve to remain persistent in their fight against inflation and warned of more pain to come.

The S&P 500 and the tech-heavy Nasdaq 100 declined for the second straight session. Commodities from oil to copper fell while the dollar snapped a two-day drop. Stocks did recover during the session though as the “bad news is good news” narrative came into play after weak manufacturing figures were released, the Philly Fed manufacturing index coming in at -19.4 against an expected reading of -6.

The US Dollar rallied modestly, with rising 10 Year treasury yields seeing the USDJPY break through and hold the 140 level.

BTCUSD took a pause today, ending the day practically unchanged after trading a narrow range in the 16000s , with news out of the FTX collapse getting worse every day , holding these levels will be a real test of the tokens resilience and crypto bulls nerve.

Crude Oil prices tumbled once again today, with US crude back at one-month lows trading with a $81 handle before finding support at the October lows.

With inflation only starting to ease and a gauge of US retail sales increasing at the fastest pace in eight months, Fed speakers in recent days have emphasized that they need to go further to extinguish prices pressures. Bullards comments came a day after San Francisco Fed President Mary Daly said a pause in rate hikes was “off the table.” Their hawkish tone was echoed by Minneapolis Fed President Neel Kashkari on Thursday afternoon.

“The takeaway is that the Fed is following the same playbook they have now for a long time,” said Johan Grahn, head of ETFs at Allianz Investment Management. Fed Chair Jerome Powell persistently reiterates his hawkish stance to keep markets at bay, so the rally after softer inflation data was not what central bank officials wanted to see, he said.

“Its a game of chicken between basically the economy, the markets and the Fed right now,” Grahn said. “And most people, I think, would be wise to believe that the Fed might win in the end.”

On Thursday, fresh data showing weekly jobless claims came in below the forecast further underscored the strength of the labor market. US mortgage rates posting their biggest weekly decline since 1981 briefly improved sentiment, even though Freddie Mac‘s chief economist said there’s a long road ahead for the housing market.