Global equity markets fell while U.S. Treasury yields rose on Friday following stronger-than-expected economic data that stoked worries that the Federal Reserve will prolong its stringent interest rate raising cycle.
Commerce Department data showed that consumer spending, which accounts for two-thirds of U.S. economy activity, rose by 1.8% in January, the largest increase in nearly two years and exceeding analyst estimates, according to a Reuters poll.
Furthermore, the personal consumption expenditures (PCE) price index, the Fed's preferred inflation measure, accelerated by 0.6% last month, the biggest increase in six months, bringing the index to 5.4% for the 12 months through January.
The strong data deepened a market selloff across most equities, with the MSCI world equity index, which tracks shares in 50 countries, shedding 1.27%. European stocks were down 0.87%.
"The fact we've got another data item that shows the economy is not slowing enough to hopefully give the Fed confidence that they're in front of the inflation problem - that's why the market is down," said Robert Stimpson, portfolio manager at Oak Associates Funds in Akron, Ohio.
On Wall Street all three major indexes were down, led by a selloff of stocks in so-called cyclical sectors including technology, communication services, consumer discretionary, and even healthcare.
The Dow Jones Industrial Average fell 1.01% to 32,817.83, the S&P 500 lost 1.13% to 3,966.91, and the Nasdaq Composite dropped 1.68% to 11,395.20.
U.S. Treasury yields jumped, with two-year yields hitting three-and-a-half-month highs, following the release of the data.
"The risk to the market is that it was premature in its anticipation of a Fed pivot. The Fed is going to continue raising interest rates higher than people think and for longer than people think," Stimpson added.
Oil prices edged higher in volatile trade, bolstered by the prospect of lower Russian exports but pressured by rising inventories in the United States and concerns over global economic activity.
Brent crude futures were up 0.96% at $83 a barrel, while West Texas Intermediate U.S. crude futures (WTI) gained 1.11% at $76.23.
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