Investing.com – Wall Street struggled for gains on Thursday, hoping to avoid what would be its worst losing-streak in 10 months as investors took a risk-off stance ahead of uncertainty increased surrounding the possible aftermath of the U.K.’s June 23 referendum on membership in the European Union (EU) and the Federal Reserve’s (Fed) outlook on the global economy caused doubts that the U.S. central bank would be able to anticipate future crisis.
At 17:11GMT or 13:11ET, the Dow 30 rose 78 points, or 0.10%, but the S&P 500 slipped 1 point, or 0.01%, while the tech-heavy NASDAQ Composite lost 8 points, or 0.17%.
Evidence of the risk-off attitude could be seen in global stocks worldwide on Thursday, with even oil trading lower for a sixth straight session, hitting a four-week low, as investors fled to safe-haven assets.
Gold soared to practically a two-year high while the U.S. 10-year bond yield slumped to levels not seen since 2012.
Blame was placed on concern over a Brexit, as a vote for the U.K. to leave the EU is known, as a string of polls throughout the week had shown that the likelihood of Britain exiting the 28-member bloc was on the rise and investors worried over the impact on global financial markets.
Market players were on high alert with traders in London preparing to pull all-nighters on the eve of the vote amid a siege of warnings of the global economic consequences from central bankers from the Fed’s own Janet Yellen on Wednesday to the Bank of Japan (BoJ) to, of course, the Bank of England (BoE) following up on Thursday.
All the while, experts were questioning the Fed’s ability to counteract a dire global economic situation faced with the U.S. central bank’s backtracking on the normalization of monetary policy.
When the Fed embarked on policy tightening last December with its first rate hike in a decade, officials had forecast four increases in the price of money.
In March, they back-stepped to project only two and, despite a string of hawkish comments from Fed members, including Yellen herself, suggesting that the market was underestimating policy direction, a dismal May jobs report showing the worst job creation since September 2010 changed the tides.
Yellen removed her phrase saying that the hike would arrive “in the coming months” and the dot plot published amid the economic projections showed that six members wanted to see only one rate hike this year, compared to just one policymaker in March.
Although the median estimate still implied two increases this year, it was reduced to 0.9%, compared to the current range of 0.25% to 0.50%.
Furthermore, the only member of the Fed’s voting group who had opposed prior policy decisions in favor of a rate hike, Esther George, now supported the decision to make no changes.
In addition, Fed forecasts also showed at least four fewer hikes than previously projected through 2018.
At least one analyst suggested that the current outlook for the next policy tightening move by the U.S. central bank was “practically never”, while Fed fund futures once again directly contradicted their expectations with even the odds of a rate hike in the February 2017 meeting at only 47%.
As evidence of the lack of expectations for the Fed to be able to continue with policy normalization, and apart from the aforementioned fact that U.S. Treasury yields sand to their lowest level in over four years due to intense demand for low-risk government debt, interest rates on U.S. 30-year mortgages fell to their lowest in more than three years, according to mortgage finance agency Freddie Mac.
Regardless, with markets continuing to evaluate the Fed decision and weigh the risks of a Brexit, relevant economic data reported stateside went largely unnoticed on Thursday.
The number of people who filed for unemployment assistance in the U.S. last week rose more than expected, although it did remain in territory usually associated with a firming labor market and the four-week moving average, a better gauge as it reduces volatility, did decline.
Consumer price inflation (CPI) in the U.S. rose slightly less than expected in May, while the small increase in prices excluding food and energy costs settled in line with forecasts.
Manufacturing activity in the Philadelphia-region registered an stronger than expected expansion in June after two consecutive months of contraction, bolstering optimism over the health of the economy.
Still ahead in the session, and with Brexit fears in focus, BoE governor Mark Carney was expected to give further dire warnings over a vote to leave in a speech at the U.K. Mansion House scheduled for 20:00GMT, or 16:00ET.