Dow ends nearly 200 points lower as Treasury yields rise

Dow ends nearly 200 points lower as Treasury yields rise

U.S. stocks closed lower on Thursday, with tech stocks leading the decline, as bond yields edged a likely Federal Reserve interest rate hike next week.

What happened?
  • The Dow Jones Industrial Average DJIA,
    -0.56%
    ended 173.27 points lower, down 0.6%, at 30,961.82.

  • The S&P 500 SPX,
    -1.13%
    fell 44.66 points, or 1.1%, to end at 3,901.35.

  • The Nasdaq Composite COMP,
    -1.43%
    fell 167.32 points, or 1.4%, to end at 11,552.36.

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

What stimulated the markets?

Big tech stocks led the decline on Thursday, with the 2-year Treasury yield trading around 40 basis points above the 10-year yield, suggesting an economic slowdown ahead as investors digested a mixed batch of data economic.

The 2-year Treasury bond yield climbed for a sixth consecutive trading session on Thursday, hitting its highest level since October 2007. The 2-year yield BX:TMUBMUSD02Y rose 8.9 basis points to 3.871%, while that the 10-year yield BX:TMUBMUSD10Y rose 4.7 basis points to 3.458%.

“There are three factors driving the markets today and the most important of these is that people are hyper focused on the yield curve, especially two-year yield curve, which remains stubbornly high,” Art Hogan said. , chief market strategist at B. Riley Financial.

“It reflects our interpretation of what monetary policy will be in the short term,” he said.

As stocks continue to rise after Tuesday’s disappointing U.S. consumer price inflation data triggered the worst one-day selloff in two years, investors were relieved that a strike National Railways has been avoided.

See: White House says tentative pact reached to avert railroad strike

Actions by rail operators were mixed as President Biden spoke publicly to confirm news of the deal, with Union Pacific Corp. UNP,
+0.19%
up 0.2%, while Canadian Pacific Railway Limited CP,
-1.81%
finished 1.3% lower. Dow Transportation’s average TDI,
-1.06%
was down 1.1%.

In Thursday’s U.S. economic data, retail sales rose 0.3% in August as Americans spent more on new cars and trucks and ate more, suggesting the economy grew at a healthy pace towards the end of summer.

Meanwhile, new jobless claims fell 5,000 to 213,000 in the week ended Sept. 10, the Labor Department said, suggesting the labor market remains healthy.

However, two regional indicators of manufacturing sentiment entered mild contraction territory in September, data showed on Thursday.

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

Tim Courtney, chief investment officer of Exencial Wealth Advisors, said the decision, which is due to be made public on Thursday September 22, will not come as a shock to markets.

“What the Fed is doing is they’ve realized that cutting rates to zero is creating so much distortion in the market that they want to go the other way,” Courtney told MarketWatch by phone. “They’re going to want to err on the too-tight side rather than the too-loose side, because they know they played a big part in causing this inflation.”

“I think they could now raise rates in November just before the midterm elections and possibly in December,” said Louis Navellier of Navellier and Associates in Nevada. “After that, they should be done. I think the Fed’s goal is to drive rates up and then watch what it does to the economy. They have already hurt the housing market and they will hurt other interest rate sensitive sectors of our economy.

Actions in the spotlight
  • Adobe Inc. ADBE shares ended down 16.8% after the software company failed to meet its revenue outlook for the current quarter and announced plans for a $20 billion merger deal.

  • Shares of human inc.
    HUM,
    +8.37%
    rose 8.4% as the company raised its earnings outlook.

  • Valero Energy Corp.
    VLO,
    -4.04%,
    Chevron Corp.
    CLC,
    -1.62%
    and Exxon Mobil Corp.
    XOM,
    -2.91%
    was trading lower, along with most oil and gas stocks in the S&P 500, as oil prices fell. West Texas Intermediate crude for delivery in October CL.1,
    +0.28%

    CLV22,
    +0.28%
    fell about 3.8%, while Energy Select Sector SPDR Fund
    XLE,
    -2.58%
    was down 1.8%.

—Steve Goldstein contributed to this article

Hear Carl Icahn at the Best New Ideas in Money Festival on September 21-22 in New York City. The legendary trader will reveal his take on this year’s market madness.

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