Dow ends down nearly 200 points as Treasury yield rises

US stocks closed lower on Thursday with tech stocks as bond yields rose ahead of the prospect of a Federal Reserve interest rate hike next week.

What happened?
  • Dow Jones Industrial Average DJIA,
    -0.56%
    It lost 0.6% to close at 30,961.82, down 173.27 points.

  • s&p 500 spx,
    -1.13%
    It closed 44.66 points or 1.1% lower at 3,901.35.

  • Nasdaq Composite Comp,
    -1.43%
    It closed 167.32 points or 1.4% lower at 11,552.36.

The Dow Jones Industrial Average gained 0.1% on Wednesday, while the S&P 500 gained 0.3% and the Nasdaq Composite gained 0.7%.

Has the market gone?

Large technology stocks led a decline on Thursday with 2-year Treasury yield trading nearly 40 basis points above the 10-year yield, indicating an economic slowdown as investors digested a mixed batch of economic data.

Yields on the 2-year Treasury note climbed for the sixth straight trading session on Thursday, reaching their highest level since October 2007. The 2-year yield BX:TMUBMUSD02Y rose 8.9 basis points to 3.871%, while the 10-year yield BX:TMUBMUSD10Y rose 4.7 basis points to 3.458%.

Art Hogan, chief market strategist at B Riley Financial, said, “There are three inputs driving markets in the market today and the biggest of them is that people are hyper-focused on the yield curve, especially two years, which remains stubbornly high.”

“This is a reflection of our interpretation of what monetary policy will be in the short term,” he said.

Stocks are still smarting from disappointing US consumer price inflation data on Tuesday, which started the worst one-day sell-off in two years, giving investors relief even as a nationwide railway strike was averted.

See: White House says tentative agreement in place to avoid railway strike

Shares of rail operators were mixed after President Biden spoke publicly to confirm news of a deal with Union Pacific Corp (UNP).
+0.19%
up 0.2%, while Canadian Pacific Railway Ltd CP,
-1.81%
Finished 1.3% lower. dow transport average djt,
-1.06%
was down 1.1%.

In US economic data on Thursday, retail sales rose 0.3% in August as Americans spent more on new cars and trucks and went out to eat more, suggesting the economy grew at a steady pace toward the end of the summer.

Meanwhile, the Labor Department suggested that new jobless benefit claims fell by 5,000 to 213,000 in the week ending September 10, suggesting the labor market remains healthy.

However, two regional gauges of manufacturing sentiment moved into marginal contraction territory in September, according to data released on Thursday.

As the weekend draws to a close, market participants await next week’s two-day Federal Reserve policy meeting, where the central bank is expected to raise its benchmark interest rate by 75 basis points or more.

Tim Courtney, chief investment officer at Accentual Wealth Advisors, said the decision, which is due on Thursday, September 22, will not be a blow to the markets.

“What the Fed is doing is they realized that dropping rates to zero has created so many distortions in the entire market that they want to go the other way,” Courtney told MarketWatch via phone. “They tend to err on the too tight side instead of the too loose side, because they know they had a big hand in causing this inflation.”

“I think they can now raise rates in November, just before the midterm elections, and possibly in December,” said Louis Navelier of Navelier and Associates in Nevada. “After that, they should be done. I think the Fed’s goal is to raise rates and then see what it does to the economy. They’ve already hurt the housing market and they’re going to hit other interest rates for our economy.” are going to damage sensitive parts of the

stock in focus
  • Adobe Inc. Shares of ADBE dropped 16.8% after the software company fell short with its revenue outlook for the current quarter and announced plans for a $20 billion merger deal.

  • shares of Human Inc.
    Gunjan,
    +8.37%
    were up 8.4% as the company raised its profit outlook.

  • Valero Energy Corp.
    VLO,
    -4.04%,
    chevron corp
    cvx,
    -1.62%
    And Exxon Mobil Corp.
    XOM,
    -2.91%
    Falling oil prices traded lower with most oil and gas stocks on the S&P 500 trading lower. West Texas Intermediate Crude CL.1, for October Delivery
    +0.33%

    clv22,
    +0.33%
    dropped by about 3.8%, while Energy Select Sector SPDR Fund
    XLE,
    -2.58%
    was down 1.8%.

—Steve Goldstein contributed to this article

Hear from Carl Icahn at the Best New Ideas at Money festival in New York on September 21 and 22. Veteran traders will share their thoughts on this year’s wild market ride.

Leave a Reply