Treasury yields and stocks

Stocks Tumble Amid Rising Treasury Yields and Powell’s Speech

Stocks on Wall Street experienced a sharp downturn on Thursday at closing as Treasury yields surged and investors grappled with the remarks delivered by Federal Reserve Chair Jerome Powell. The Dow Jones Industrial Average (^DJI) saw a significant decline of 0.75%, the S&P 500 (^GSPC) dipped by 0.9%, and the Nasdaq Composite (^IXIC) suffered the steepest loss, plummeting by 1%.


This downturn was triggered by a four-day consecutive surge in Treasury yields, exerting substantial pressure on stocks. Heightened concerns over the ongoing Middle East conflict also factored into the unease among investors.


The benchmark 10-year yield (^TNX) ascended to nearly 5%, marking its highest point in 16 years, while the 30-year yield (^TYX) reached 5.1%.


During Powell’s address, he underscored that inflation remains unacceptably high, signaling the Federal Reserve’s intention to maintain elevated interest rates in the near term, citing robust economic growth as a rationale. This stance contrasted with the perspective of certain strategists, including Mohamed El-Erian, who recently questioned whether the central bank’s inflation target should be revised.


The repercussions of sustained high interest rates on corporate performance were closely monitored, particularly as the third-quarter earnings season unfolds. Tesla (TSLA) CEO Elon Musk expressed apprehension on Wednesday, warning that escalated borrowing costs could potentially deter consumers from purchasing the company’s electric vehicles. This warning came in the wake of Tesla’s earnings falling short of forecasts, resulting in a sharp 10% decline in Tesla’s shares.


Conversely, streaming giant Netflix (NFLX) witnessed a remarkable 16% surge in its shares following a report of a substantial increase in subscriber numbers. The company also announced plans to implement price hikes in the United States.


In economic updates, weekly jobless claims registered their lowest figures since January, indicating a robust labor market in the United States. Investors are advised to remain vigilant, keeping a keen eye on factors such as the Federal Reserve’s policy stance, prevailing interest rates, and corporate earnings as they navigate the current financial landscape. 


With stocks reeling and treasury yields surging, investors brace for a volatile market ahead, closely monitoring economic indicators and central bank actions.

Source: Yahoo Finance

Related posts