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Cuts ahoy | US stocks fell sharply as bonds rallied after a fresh dose of weak economic data led traders to reconsider whether the Federal Reserve is wise to hold off cutting rates before September. Unemployment claims hit an almost one-year high, and manufacturing activity shrank. Thursday's price action was another episode of extreme day-to-day volatility that has featured rapid rotations into and out of asset classes and sectors, with investors choosing Treasuries as the latest haven trade. The Nasdaq 100 saw its biggest one-day reversal since May 2022, while the S&P 500 fell. US 10-year yields broke below 4%, while swap traders are now fully pricing in three quarter-point rate cuts from the Fed this year. Jerome Powell signaled this week that officials are on course to cut rates in September unless inflation progress stalls. All eyes will now turn to the official US jobs report Friday to see if traders' views on easing are warranted.
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