Updated at 4:15 pm EST
Stocks ended higher Wednesday, while global stocks steadied and the dollar breached the highest levels in two decades, as investors closely tracked developments in the bond market that point to a near-term recession in the world's biggest economy.
Safe-haven trading has lifted the U.S. dollar index, which benchmarks the greenback against a basket of its global peers, to the highest levels in two decades this week -- and again July 6, rising 0.53% to 107.01 -- as factory activity and output data from major economies around the world slows and inflation pressures continue to boost input costs and squeeze margins.
In the bond market, 2-year Treasury note yields traded north of 10-year note yields for most of the overnight session, after a so-called 'inversion' during yesterday's session on Wall Street, and continued that trend in early New York dealing.
Benchmark 10-year notes were last seen trading at 2.926% while 2-year notes were changing hands at 2.971%.
Investors typically associated a sustained inversion as a signal of near-term recession as traders sell short-term notes in anticipation of rate hikes, but buy longer-dated paper in advance of an economic slowdown.
To that end, the Atlanta Fed's GDPNow growth forecasting tool suggests the economy is contracting at a 2.1% clip as it enters the third quarter, following what is likely to be two consecutive quarters of shrinkage between January and June.
That's put a great deal of focus on the Federal Reserve and its committed path to raising interest rates in order to slow the fastest pace of inflation in forty years. Chairman Jerome Powell has cautioned that taming consumer price pressures will likely require 'pain' from the U.S. economy, but some investors wonder if the Fed will slow the pace of signaled rate hikes if the U.S. tips into recession.
Minutes from the Fed's June meeting noted that the central banks was worried that inflation may become so intrenched in the U.S. economy that the public would question its resolve to fight it, and argued for more "restrictive" rates over the coming months.
The Fed lifted its base lending rate by 75 basis points, the biggest since 1994, to a range of 1.5% to 1.75% on June 15, and said near-term rate moves would be needed in order to combat the faster since the early 1980s.
Fed Chair Jerome Powell, who had guided investors to a rate hike of only 50 basis points, said at the time that rate hikes of that size won't be "common", but current market betting suggests an 88% chance of a similar-sized hike when the Fed meets later this month in Washington.
"Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist," the minutes noted.
The stronger greenback, which makes oil more expensive for developing and non-dollar economies around the world, kept a lid on crude prices in overnight trading in moves that were complicated by news that Mohammad Barkindo, the secretary general of OPEC, has died at the age of 63 just hours after delivering a speech in Abuja.
Barkindo, who served as Nigeria's energy minister prior to taking on the top role at OPEC in 2006 -- and again in 2016 -- was seen by many to have helped transform the cartel from a loose collective of disparate interests into a more organized group of oil producing nations that, along with Russia, have dictated the pace of output for much of the past six years.
WTI crude futures for August delivery, the most tightly-linked commodity to U.S gasoline prices, were marked $1.12 lower on the session at $98.38 per barrel while Brent crude contracts for September delivery, the global pricing benchmark, fell $2.43 to change hands at $100.34 per barrel.
In overseas trading, Europe's Stoxx 600 was marked 1.75% higher by the close of trading in Frankfurt as the euro fell to 1.0176 against the U.S. dollar, the lowest since December of 2002.
In Asia trading, the region-wide MSCI ex-Japan index fell 0.95% while the Nikkei 225 closed 1.2% lower in Tokyo.
On Wall Street, the S&P 500 gained 0.36%, while the Dow Jones Industrial Average finished up 69 points, or 0.22%, to 31,037. The tech-focused Nasdaq rose 0.35%.
Tesla (TSLA) - Get Tesla Inc. Report shares were active after data from China showing a solid rebound in June sales, ending marginally lower, following on from a record month of production for the carmaker in the world's biggest auto market.
Tesla sold 78,000 China-made cars last month, the China Passenger Car Association (CPCA) said Wednesday, up from 32,165 in May and the highest on record for clean-energy carmaker.
Tesla sold just 1,152 China-made cars in April -- the lowest in two years -- when the group's Shanghai gigafactory was closed for 22 days amid the city's strict Covid lockdown.
Food delivery shares were also in focus after Just East Takeaway (TKAYF) , which soared 14.2%, said retail giant Amazon (AMZN) - Get Amazon.com Inc. Report has taken a 2% stake in its U.S. division known as Grubhub.
Uber Technologies (UBER) - Get Uber Technologies Inc. Report shares were marked 4.57% lower at $21.49 while DoorDash (DASH) - Get DoorDash Inc. Class A Report fell 7.41% to $69.35 each following news of the Amazon stake in Grubhub, as investors pared bets on market share gains for the meal delivery leaders.