Global Markets: Wall Street dips as benchmark US bond yields breach 5%
20/10/2023 16:31
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Major U.S. stock indexes on course for weekly losses
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U.S. dollar brushes against 150 Japanese yen level
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10-yr U.S. yields touch 5% for first time since 2007
(Updates to 10:58 EDT)
By Stephen Culp
NEW YORK, Oct 20 (Reuters) - Wall Street dipped on
Friday as investors neared the finish line of a week marked with
mixed earnings, warnings of possible further rate hikes from the
Federal Reserve, and worries of escalation of the Middle East
conflict.
The yield on 10-year U.S. Treasury notes briefly crossed the
5% barrier late Thursday for the first time since July 2007, and
is on course for its largest weekly surge since April 2022,
powered by solid economic data.
All three major U.S. stock indexes were lower in early
trading, with interest-rate-sensitive tech and tech-related
megacaps pulling the Nasdaq down most.
All three indexes appeared set to notch week-on-week losses.
"(Investors are) digesting comments from (Federal Reserve)
Chairman Powell and putting them into context with remarks of
other Fed speakers who have suggested that the move upward in
Treasury yields is helping the Fed tighten conditions," said Tom
Hainlin, national investment strategist at U.S. Bank Wealth
Management in Minneapolis. "And perhaps there’s lower
probability that the Fed will have to raise interest rates
further."
Strong U.S. retail sales in September reinforced ideas that
the Fed may need to keep interest rates high for longer, Hainlin
said.
Third-quarter earnings season has hit full stride, with 86
companies in the S&P 500 having reported. Of those, 78% have
delivered results above expectations, according to LSEG.
Geopolitical tensions dampened investor risk appetite as
Israel leveled a northern Gaza district.
The Dow Jones Industrial Average .DJI fell 175.13 points,
or 0.52%, to 33,239.04, the S&P 500 .SPX lost 42.15 points, or
0.99%, to 4,235.85 and the Nasdaq Composite .IXIC dropped
183.29 points, or 1.39%, to 13,002.89.
European shares extended their sell-off, and were on a path
to their largest weekly percentage drop in three months as
mounting tensions in the Middle East, climbing interest rates
and disappointing earnings dampened investor risk appetite.
The pan-European STOXX 600 index .STOXX lost 1.16% and
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.89%.
Emerging market stocks lost 0.52%. MSCI's broadest index of
Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.58%
lower, while Japan's Nikkei .N225 lost 0.54%.
The yield on U.S. 10-year Treasury notes, the bedrock of the
global financial system, appeared to take a pause at but
remained on track to nab its biggest weekly gain in over a year
as robust economic data continues to defy the Fed's restrictive
policy rates.
Benchmark 10-year notes US10YT=RR last rose 17/32 in price
to yield 4.9179%, from 4.988% late on Thursday.
The 30-year bond US30YT=RR last rose 8/32 in price to
yield 5.0836%, from 5.102% late on Thursday.
The dollar briefly touched the closely-watched 150 level
against the Japanese yen on Friday, boosted by rising Treasury
yields and Federal Reserve Chairman Powell hinted at the
possibility of additional policy rate hikes.
The greenback was essentially flat against a basket of world
currencies.
The dollar index .DXY fell 0.09%, with the euro EUR= up
0.09% to $1.0589.
The Japanese yen weakened 0.06% versus the greenback at
149.89 per dollar, while Sterling GBP= was last trading at
$1.2147, up 0.03% on the day.
Oil continued to climb, setting course for its second
straight weekly gain as the potential escalation of Israel-Hamas
war stoked supply worries.
U.S. crude CLcv1 rose 1% to $89.25 per barrel and Brent
LCOcv1 was last at $93.25, up 0.94% on the day.
Gold extended its advance, nearing the key $2,000 per ounce
level as geopolitical tensions enhanced the metal's safe-haven
appeal.
Spot gold XAU= added 0.9% to $1,990.81 an ounce.
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Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
Stocks sapped by rising borrowing costs https://tmsnrt.rs/407VZ03
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(Reporting by Stephen Culp; Additional reporting by Marc Jones
in London; Editing by Rod Nickel)
((stephen.culp@thomsonreuters.com; 646-223-6076;))
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