That raised the stakes for the March payrolls report due on Friday, where any outcome below the 140,000 gain expected would only add to recession fears.
“The current market narratives center on this fear of stagflation, which conceptually could be the worst possible combination for stocks,” said Talley Leger, chief market strategist at The Wealth Consulting Group in New Jersey.
“So in a slowing growth environment, earnings would decelerate, or even collapse in a recession. That’s another big fear in the market. And on the other side, spiralling inflation would squeeze stocks on the valuation channel.”
Gold prices extended their stellar run, hitting another record high of US$3,128.06. Spot gold rose 1.31 per cent to US$3,124.34 an ounce, while US gold futures rose 1.2 per cent to settle at US$3,150.30.
In currency markets, the dollar pared early losses to strengthen against the Japanese yen and the euro amid the uncertainty around tariffs.
Against the Japanese yen, the dollar strengthened 0.07 per cent to 149.93. The euro was down 0.11 per cent at US$1.0815. Against the Swiss franc, the dollar strengthened 0.48 per cent to 0.884 franc.
The dollar index, which measures the greenback against a basket of currencies, including the yen and the euro, rose 0.17 per cent.
Bond investors seemed to be betting the slowdown in US economic growth will outweigh a temporary lift in inflation and prompt the Fed to cut rates by about 80 basis points this year.
The yield on benchmark US 10-year notes fell 3.5 basis points to 4.221 per cent. In Europe, the yield on the benchmark German 10-year Bunds rose 0.9 basis points to 2.738 per cent.
The outlook for rates could become clearer when Fed Chair Jerome Powell speaks on Friday, following a host of other Fed speakers this week.
Brent rose 1.5 per cent to settle at US$74.74 a barrel, while US West Texas Intermediate crude rose 3.1 per cent to settle at US$71.48 as Trump threatened secondary tariffs on buyers of Russian oil if he felt Moscow was blocking efforts to end the war in Ukraine.
