U.S. stocks slide deepens as dollar extends advance

Equities extended declines on Friday, with an index of global stocks on track for the worst week since June, while a gauge of the dollar soared to a fresh record, reflecting bets for outsize Federal Reserve interest rate hikes.

US futures dropped, suggesting the selloff that drove the S&P 500 index to its lowest close in about two months on Thursday isn’t over yet. Europe’s benchmark share gauge headed for a fourth day of losses. Stocks slumped in Japan, Hong Kong and mainland China, with little impact on sentiment from Chinese industrial-production and retail-sales data that beat expectations.

Policy-sensitive two-year Treasury yields extended a rise to the highest since 2007, deepening the curve inversion that’s seen as a recession signal. The latest US economic data painted a mixed picture for the economy that backed the view for hawkish monetary policy. Swaps traders are pricing in a 75 basis-point hike when the Federal Reserve meets next week, with some wagers appearing for a full-point move. 

“Everything points to another 75 basis-point rate hike by the Fed when it meets next week. The likelihood that it will have to go ‘big’ again in November is elevated, too,” said Raphael Olszyna-Marzys, an economist at Bank J Safra Sarasin. “What’s more, its new projections should indicate that the fight against inflation will be more painful than previously acknowledged.”