By Chibuike Oguh and Alun John
NEW YORK/LONDON (Reuters) - A global bond selloff continued on Wednesday, hurting stocks and boosting the dollar, amid signs that the U.S. economy remains strong, limiting the prospects of further interest rate cuts.
The benchmark 10-year U.S. Treasury yield rose to as high as 4.73%, its highest since April 2024, building on Tuesday's 7 basis point rise. It was last up 0.4 basis points to 4.689%.
"Going into this first quarter that we're in right now, aside from earnings, I think a big risk for equities is if bond yields do get to 5%," said Mark Malek, chief investment officer at SiebertNXT in New York. "Buyers are going to be a little bit more reticent. So the people that were powering the market higher, the bid is going to weaken."
The selloff in bonds on Wednesday accelerated after a CNN report that U.S. President-elect Donald Trump is considering declaring a national economic emergency to provide legal justification for a series of universal tariffs on allies and adversaries.
On Wall Street, all three main indexes were trading lower in choppy trading, weighed down by utilities, communication services, technology, and consumer discretionary stocks. Health care equities were the only group of stocks to advance out of the 11 in the benchmark S&P 500.
The Dow Jones Industrial Average fell 0.39% to 42,364.56, the S&P 500 fell 0.50% to 5,879.54, and the Nasdaq Composite fell 0.77% to 19,338.71.
European shares dipped, with the pan-European STOXX 600 finishing down 0.2%, with most regional bourses also in the red. MSCI's gauge of stocks across the globe fell 0.59% to 841.95.
European government bond yields surged, with those on the German benchmark 10-year notes hitting their highest in about six months. The British 10-year gilt yield rose over 11 basis points to 4.80%, the highest since 2008.
Strong U.S. economic data have weighed on U.S. Treasuries in recent weeks, with investors scaling back their expectations for the size of Federal Reserve rate cuts this year.
Markets are only fully pricing in one 25 basis point rate cut in 2025, and see around a 60% chance of a second.
Investors will be eyeing Friday's more comprehensive non-farm payrolls data after data on Wednesday showed a lower than expected increase in private payrolls and jobless claims.
"Longer maturity bond yields for the most part are going to be higher if we expect a strong economy and that's really related to inflation," Malek added.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,rose 0.38% to 109.11, with the euro down 0.32% at $1.0305.
Oil prices fell more than 1% as a stronger dollar and large builds in U.S. fuel inventories last week pressured prices. Brent crude fell 1.12% to $76.20 a barrel, while U.S. West Texas Intermediate crude fell 1.19% to $73.37.
Gold prices advanced. Spot gold rose 0.22% to $2,655.39 an ounce. U.S. gold futures rose 0.76% to $2,676.90 an ounce.