Treasuries rose and stocks declined as Federal Reserve officials met at Jackson Hole and investors reassessed the outlook for markets at the end of a turbulent week.
Equities trading has been whipsawed by gains and losses this week, indicating markets remain subject to sudden shifts in investor sentiment.
The Standard & Poor’s 500 Index slipped after the U.S. benchmark’s biggest two-day gain since the beginning of the bull market in 2009. Oil swung between gains and losses after surging 10 percent in New York on Thursday.
“We need to see a bit of consolidation given the recent rally,” said Gunther Westen, who helps oversee about $28 billion as head of asset allocation and fund management at Meriten Investment Management GmbH in Dusseldorf, Germany. “There’s still insecurity. The Fed is still looming over the markets.”
Global equities lost as much as $8.4 trillion in value after China’s unexpected devaluation of the yuan on Aug. 11 spurred concern the world’s second-biggest economy was on the brink of a deeper slowdown, damping demand for raw materials and spurring a selloff in developing economies.
Fed officials gathered in Jackson Hole, Wyoming, are weighing when to begin raising interest rates for the first time since 2006. Markets rebounded after a report yesterday showed U.S. economic growth accelerated more than analysts forecast.
The S&P 500 fell 0.3 percent at 9:48 a.m. in New York, after posting its biggest two-day rally since March 2009 when stocks bottomed during the global financial crisis. TheStoxx Europe 600 Index dropped 0.5 percent, after surging 3.5 percent on Thursday. The yield on 10-year Treasuries fell 5 basis points to 2.14 percent.
Stock markets will be subject to higher volatility for weeks, according to a note Thursday from JPMorgan Chase & Co. derivatives strategist Marko Kolanovic. He cited quantitative traders whose funds are tuned to price trends and volatility.
Bigger moves are likely at the beginning and end of sessions as those investors seek to tweak holdings to take into account this month’s correction, Kolanovic said. Such institutions may need to sell $300 billion of stock, all told, he wrote.
“The obvious risk is if these technical flows outsize fundamental buyers,” Kolanovic said in a note to clients. “In the current environment of low liquidity, they may cause a market crash such as the one we saw at the U.S. market open on Monday.”
The Stoxx 600 has had moves of at least 1.7 percent for seven straight days and is heading for a third consecutive weekly decline, the longest stretch since October. It’s fallen 9.1 percent this month, the most in four years.
A Commerce Department report showed consumer spending increased 0.3 percent in July, matching the prior month’s gain. The median forecast in a Bloomberg survey of 77 economists called for a 0.4 percent increase. Wages rose by the most this year.
While the Shanghai Composite Index jumped 4.8 percent, capping a 10 percent gain across two days, the Hang Seng China Enterprises Index dropped 1.1 percent in the final hour of trading in Hong Kong.
China intervened to shore up its volatile equity market late Thursday, according to people familiar with the matter, while a commentary in the official Xinhua News Agency said developed-nation monetary policies were to blame for global financial-market volatility.
Policy makers are said to be trying to end a stock rout before a Sept. 3 military parade that will celebrate the 70th anniversary of the World War II victory over Japan.
“China wants to save face as the parade approaches,” said Daniel Chan, a Hong Kong-based analyst at Brilliant & Bright Investment Consultancy Ltd. Bloomberg