Wed. Jul 6th, 2022

Kate Duguid in New York, Naomi Rovnick, George Steer and Neil Hume in London and Hudson Lockett in Hong Kong

Column chart of Quarterly performance,% showing The S&P 500 had its worst quarterly performance in two years

US stocks slumped on Thursday, closing out their worst quarter since the start of the coronavirus pandemic under pressure from the effects of the war in Ukraine, soaring inflation readings and the start of what is expected to be an aggressive series of interest rate increases by the Federal Reserve.

The benchmark S&P 500 index fell 4.9 per cent over the three months to the end of March, while the tech-heavy Nasdaq Composite declined 9.1 per cent.

It was the weakest quarter for both, and also the first quarter of losses for the S&P 500, since the first quarter of 2020.

US Treasury bonds have also suffered dramatic losses this quarter: the two-year yield, which moves inversely to price, has risen 1.58 percentage points, the most since the second quarter of 1984. The benchmark 10-year Treasury yield has increased by 0.82 percent points, the most since the first quarter of 2021.

The two-year yield, which moves with interest rate expectations, has risen as the Fed increased interest rates by a quarter-point in March for the first time since 2018. Roughly eight more quarter-point cuts are priced in this year as investors bet the Fed will have to move more rapidly than in previous cycles to tamp down inflation.

A Bloomberg index of total returns from Treasuries had fallen 5.6 per cent this year as of Wednesday’s close, putting it on course to post its weakest quarterly performance since the inception of the index in 1973.

Oil prices weakened on Thursday after the US announced a “historic release” of about 180mn barrels from its Strategic Petroleum Reserve in response to a global supply shortage.

Read more on the market’s moves here

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