On Thursday, stocks slumped and were weighed down by rising Treasury yields, as investors worried about new data suggesting ongoing US inflation. The Dow Jones Industrial Average fell 0.51 points to 33,631.14. The S&P 500 dropped 0.62% to 4,349.61. The Nasdaq Composite, which is heavily weighted toward technology, fell 0.63% to 13,574.22. The major indices’ four-day winning streak came to an end.
On Thursday, treasury yields rose as a result of new inflation data. The benchmark 10-year rate increased by about 11 basis points to 4.70%. The yield on the 2-year Treasury note was 5.06%, up more than 6 basis points. Yields just reached a 16-year high, causing equities to tremble. The 10-year Treasury yield was above 4.8% earlier this month. Some investors feel higher yields are going to stay, which influenced the share market’s decline on Thursday.
Managing partner and global strategist at MRB Partners said that: “Every [CPI] print that indicates more stickiness erodes the underlying conviction that we will finally reach 2% inflation. We will not achieve 2% inflation, but the bond market continues to believe we will get close”. He also mentioned that equities are continuing to fall “as the market recognizes that yields will rise.”
Vice president and macro strategist at Carson Group, has saw an “immediate negative correlation to equity prices” when yields rise, especially over a short period of time, as they have in recent weeks. He said that there is an equity risk premium, but it is likely lower than it was before the current rise in yields. To be fair, he added that his business is still overweight in equities, citing optimism that the solid economic climate will boost third-quarter results.
According to a Bureau of Labor Statistics report released Thursday, the consumer price index grew 0.4% month over month and 3.7% year over year. Dow Jones forecasts 0.3% and 3.6% growth, respectively. The core inflation rate, which excludes food and energy prices, increased 0.3% month on month and 4.1% year on year, as expected by economists. The news comes on the heels of a higher-than-expected September producer pricing index reading.
On Thursday, Walgreens shares rose 7% after the pharmacy company revealed reduced losses and progress on cost-cutting plans. Walgreens provided weak profit guidance and missed results. On Friday, several corporations, including JPMorgan, BlackRock, and UnitedHealth Group, are expected to announce earnings.
The current Israel-Hamas conflict has sparked concerns about a potential oil supply shortage and an increase in fuel costs if geopolitical turmoil spreads to other oil producers in the region.
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