Global stocks dip, bond yields rise as Fed zest fades

Thu Oct 29, 2015 4:51pm EDT
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By David Gaffen

NEW YORK (Reuters) - Stock markets around the world fell and bond yields rose as investors weighed the implications that a U.S. interest rate rise before the end of the year would have for the global economy and markets.

The Federal Reserve, which kept its rates on hold as expected on Wednesday, took the unusual step of strengthening its language about timing in its statement, making it clear that a December rate hike was still possible. The Fed also removed a previous warning about slowing global growth.

Wall Street edged lower, giving up some of Wednesday's gains. The U.S. stock market initially reacted negatively to the Fed statement, but later reversed course to end near the day's highs on Wednesday, and Thursday's losses were relatively slim.

The Dow Jones industrial average .DJI fell 23.72 points, or 0.13 percent, to 17,755.80, the S&P 500 .SPX lost 0.94 point, or 0.04 percent, to 2,089.41 and the Nasdaq Composite .IXIC dropped 21.42 points, or 0.42 percent, to 5,074.27.

U.S. Treasury yields continued Wednesday's rise after the Fed explicitly referred in its statement at the end of its two-day policy meeting to conditions necessary "to raise the target range at its next meeting". Reference to a particular meeting is rare for the Fed.

The benchmark 10-year Treasury yield rose 8 basis points to 2.17 percent US10YT=RR. The two-year note's yield was 0.73 percent, highest since late September.

The MSCI All-Country World Index has recovered most of the losses that occurred beginning in mid-August on worries about slowed worldwide demand and the Fed's plans. It ended down 0.55 percent on Thursday.

The first estimate of third quarter U.S. growth, released on Thursday, showed the world's biggest economy expanded at a 1.5 percent annualized pace, below the expected 1.6 percent. But economists expect growth to pick up in the fourth quarter, given strong consumer spending figures.   Continued...

Traders gather at the post that trades Allergan stock on the floor of the New York Stock Exchange October 29, 2015.  REUTERS/Brendan McDermid