Dow falls 500 points? Treasury yields pressure stocks
U.S. stocks closed lower as Treasury yields climbed to levels not seen in more than two decades. The Dow Jones Industrial Average fell 341.41 points, while the…
Rising U.S. borrowing costs put pressure on markets with investors watching Treasury yields reach levels not seen in more than two decades. The Dow falls 500 points phrase in the headline context overstates the session’s decline: the Dow Jones Industrial Average lost 341.41 points on Wednesday, while the 10-year Treasury yield touched 5.365%.
The Dow closed at 51,179.87, down 0.66%, as the S&P 500 shed 0.22% to end at 7,801.77. The Nasdaq Composite also slipped 0.22%, closing at 27,538.69. All three major U.S. indexes finished the session lower.
Bond yields were the central pressure point. The 10-year Treasury note yield reached its highest level since April 2002, while the 30-year bond yield hit its highest since May 2002 at 5.732%.
The move eased somewhat after the Treasury sold $39 billion in 10-year notes at auction. The yield later stood little changed, helping stocks pare some losses. Investors were focused on whether higher rates would make borrowing more expensive for companies and households.
That concern showed up in bank shares. Goldman Sachs and Bank of America each fell 1%, while Wells Fargo, Citigroup and JPMorgan also closed lower. Investors feared that higher interest rates could weigh on lending activity.
Technology stocks also weakened as higher borrowing costs raised concerns about spending on artificial intelligence infrastructure. CrowdStrike fell almost 5%; Palo Alto Networks and Meta Platforms lost more than 3% and 2%, respectively.
Dow falls 500 points: what the yield move means
The yield’s climb matters beyond the bond market because it can lift financing costs and narrow companies’ room to deliver earnings. Mike Dickson, head of research and quantitative strategies at Horizon Investments, told CNBC that “the margin for error has narrowed as it relates to earnings,” while noting earnings could “still carry the market higher.”
Dickson said current yields appeared justified, but investors should not dismiss their effect. He also warned that a rise driven by inflation expectations becoming unanchored could become harder to control. He described inflation expectations as “very well anchored” at the time.
Minutes from the Federal Reserve’s September meeting added to the rate debate. Most participants said another increase in the target range for the federal funds rate would likely be appropriate by year-end, though the minutes did not indicate when officials might act. They said future decisions would depend on incoming information and its implications for the outlook and balance of risks.
The Treasury auction drew stronger demand than some investors had feared, according to John Luke Tyner, head of fixed income at Aptus Capital Advisors. Bill Merz, head of capital markets research at U.S. Bank Asset Management, said the bid-to-cover ratio and indirect bidder participation were “quite strong.” He called it “a solid auction,” while cautioning that investors should consider other market drivers too.
Oil prices also fell. U.S. crude settled down 1.3% at $88.28 per barrel, while Brent crude futures ended at $100.20 a barrel, down 0.4%.
The decline followed a stronger session for the S&P 500, which closed above 7,800 for the first time on Tuesday, led by chipmakers. Wednesday’s close put the benchmark at 7,801.77.
Source: cnbc.com
