Dow falls 400 points as Treasury yields hit 24-year high
U.S. stocks fell Wednesday as Treasury yields climbed to levels not seen in more than two decades. The Dow Jones Industrial Average lost 341.41 points, while…
U.S. stocks fell Wednesday as rising bond yields put fresh pressure on markets, and the dow falls 400 points headline captured a session in which the Dow Jones Industrial Average lost 341.41 points. The benchmark 10-year Treasury yield reached 5.365%, its highest level since April 2002, raising concerns for investors across financial and technology stocks.
The Dow closed at 51,179.87, down 0.66%. The S&P 500 shed 0.22% to end at 7,801.77, while the Nasdaq Composite slipped 0.22% to 27,538.69. All three major indexes finished lower.
The bond market set the tone. The 30-year Treasury yield also reached 5.732%, its highest level since May 2002, before the 10-year yield eased from its session peak following a Treasury auction.
That mattered for investors weighing borrowing costs against company earnings. Higher rates can weigh on lending activity and make financing expensive for businesses, while the market’s recent gains have left less room for earnings to disappoint, according to analysts cited by CNBC.
A sharp move. Then a partial recovery.
The Treasury sold $39 billion in 10-year notes. Bill Merz, head of capital markets research at U.S. Bank Asset Management, said the auction’s bid-to-cover ratio and indirect bidder participation were “quite strong.”
“There's investor interest at these relatively elevated yield levels compared to what people have become used to in the last 15 to 20 years, but we need to take it with a grain of salt. There are a lot of other drivers out there that we need to take into consideration as well on a standalone basis,” Merz said. “It was a solid auction.”
The yield’s retreat helped stocks pare their losses. John Luke Tyner, head of fixed income at Aptus Capital Advisors, said the auction results for the 10-year notes were much stronger than feared, according to CNBC.
The Federal Reserve’s September meeting minutes added another concern. Officials indicated that another increase in the target range for the federal funds rate would likely be appropriate by year end, while saying future decisions would depend on incoming information and the balance of risks.
“Participants emphasized, however, that they approached each meeting with an open mind and decisions at future meetings would depend on incoming information and its implications for the outlook and the balance of risks,” the minutes said.
Higher yields pressure banks and technology shares
Bank stocks fell as investors worried that higher interest rates could hinder lending. Goldman Sachs and Bank of America shares each declined 1%. Wells Fargo, Citigroup and JPMorgan also closed lower.
Technology stocks faced pressure over concerns that higher borrowing costs could constrain investment in artificial intelligence. CrowdStrike shares fell almost 5%, while Palo Alto Networks and Meta Platforms lost more than 3% and 2%, respectively.
Mike Dickson, head of research and quantitative strategies at Horizon Investments, told CNBC that rising rates had narrowed the margin for error on earnings. He also said earnings could “still carry the market higher.”
“The level of yields seem very justified, but it doesn't make them irrelevant,” Dickson said. He added that inflation expectations appeared “very well anchored,” while warning that a rise in the 10-year yield driven by unanchored inflation expectations could become harder to control.
Oil prices also ended lower. U.S. crude settled down 1.3% at $88.28 per barrel, while Brent crude futures finished at $100.20 a barrel, down 0.4%.
The market had closed above 7,800 for the first time on Tuesday, with chipmakers leading gains. By Wednesday’s close, the S&P 500 stood at 7,801.77.
Source: cnbc.com
