(Recasts first paragraph, adds comments from U.S. Federal
Reserve Chair Jerome Powell, updates prices and details)
New York, March 4 (Reuters) - Wall Street slumped on
Thursday and global stock markets declined after U.S. Federal
Reserve Chair Jerome Powell repeated his pledge to keep credit
flowing until Americans are back to work, pushing back at
investors who have doubted if he can hold that promise after the
Benchmarket U.S. Treasury yields rose toward last week's
highs as Powell spoke, and the dollar jumped.
Oil prices spiked as OPEC and its allies agreed to extend
most oil output cuts into April, after deciding that the demand
recovery from the coronavirus pandemic was still fragile.
With COVID-19 vaccines rolling out and the government fiscal
taps open "there is good reason to think we will make more
progress soon" toward the Fed's goals of maximum employment and
2% sustained inflation, Powell told a Wall Street Journal forum.
But "even if that happens it will take substantial time,"
The Dow Jones Industrial Average fell 350.11 points,
or 1.12%, to 30,919.98, the S&P 500 lost 47.21 points, or
1.24%, to 3,772.51 and the Nasdaq Composite dropped
246.59 points, or 1.9%, to 12,751.16.
"This market has already been weak and was looking for
another excuse to sell, said Dennis Dick, head of markets
structure and a proprietary trader at Bright Trading LLC in Las
Vegas, citing fear in equities markets for the past nine months.
"Now, Powell gives them that excuse as well."
The pan-European STOXX 600 index lost 0.37% and
MSCI's gauge of stocks across the globe shed
1.56%, its third day of losses.
Emerging market stocks lost 2.54%. MSCI's broadest index of
Asia-Pacific shares outside Japan closed 2.57%
lower, while Japan's Nikkei lost 2.13% to its lowest
since Feb. 5.
Worries about loftier U.S. bond yields have also hit global
Powell said the increase was "notable" but he did not
consider it a "disorderly" move, or one that pushed long-term
rates so high the Fed might have to intervene to bring them
Benchmark 10-year notes last fell 22/32 in price
to yield 1.5449%, from 1.47% late on Wednesday. They earlier
touched their highest levels since a one-year high of 1.614% set
last week on bets on a strong economic recovery aided by
government stimulus and progress in vaccination programs.
The cost of borrowing U.S. Treasuries in the overnight
repurchase agreement, or repo market, went negative on Thursday,
analysts said, amid the bond market sell-off, which pointed to
stress in money markets.
The 10-year UK Gilts yield was last at 0.733%, after
touching 0.796% on Wednesday, near last week's
11-month high of 0.836%.
Germany's 10-year yield was down 2 basis points
to -0.31% after rising 5 basis points on Wednesday.
Many Fed officials have downplayed the rise in Treasury
yields in recent days, although Fed Governor Lael Brainard on
Tuesday acknowledged that concerns over the possibility a rapid
rise in yields could dampen economic activity.
The specter of high U.S. bond yields also undermined
low-yielding, safe-haven assets, such as the yen, the Swiss
franc and gold.
Currency investors continued to snap up dollars as they bet
on the U.S. economy outperforming its peers in the developed
world in coming months.
The dollar index rose 0.564%, with the euro
down 0.78% to $1.1968.
The Japanese yen weakened 0.82% versus the greenback.
Dollar/yen rose to 107.90, roughly a seven month high,
while Sterling was last trading at $1.389, down 0.45% on
Other safe-haven currencies were weakened, with the Swiss
franc dropping to a five-month low against the dollar and
a 20-month trough versus the euro.
Rising Treasury yields pushed non-interest-bearing gold
down 0.9%. Spot gold dropped 0.8% to $1,697.56 an
ounce, but still near a nine-month low.
Investor focus on a U.S. economic rebound was unshaken by
data released overnight that showed the labor market struggling
in February, when private payrolls rose less than expected.
Oil prices rose for a second straight session as OPEC and
its allies agreed to extend most oil output cuts into April,
after deciding that the demand recovery from the coronavirus
pandemic was still fragile.
U.S. crude recently rose 4.57% to $64.08 per barrel
and Brent was at $67.00, up 4.57% on the day.
(Reporting by Suzanne Barlyn; Editing by Nick Zieminski and