The yield on US government bonds with a term of 10 years was briefly raised above the 5% limit on Thursday for the first time since July 2007, reaching 5.001%.
Benchmark interest rates are on track for the biggest weekly increase since April 2022, driven by solid economic data.
All three of the most important US stock indices fell by midday, with rate-sensitive tech and tech-related megacaps dragging the Nasdaq down the most.
It looked like all three indexes would post week-on-week losses.
“Investor sentiment is quite negative, and we believe it is important to zoom out and focus on the long term – even the medium term – and a lot of this will fall by the wayside,” said Ross Mayfield, investment strategy analyst bee Baird in LouisvilleKentucky.
“Not enough attention is being paid to corporate earnings, which have come in strongly, and guidance is solid,” Mayfield added. “Investors would be wise to pay as much attention to this as they do to macroeconomic events and geopolitical tensions.”
Market participants also digested the Federal Reserve chairman’s comments Jerome Powell That left the door open for an additional rate hike, while other Fed officials have hinted that the tightening cycle could be coming to an end.
“(Investors) are digesting (Fed) Chairman Powell’s comments and putting them in context with comments from other Fed speakers who have suggested that the upward movement in the economy The return on government bonds helps the Fed tighten conditions,” said Tom Hainlin, national investment strategist at US Bank Wealth Management in Minneapolis. “And it may be less likely that the Fed will have to raise rates further.”
Strong U.S. retail sales in September reinforced the idea that the Fed may need to keep rates high for longer, Hainlin said.
Third-quarter earnings season is in full swing, with 86 companies in the S&P 500 reporting their numbers. According to LSEG, 78% of these delivered results that exceeded expectations.
Geopolitical tensions dampened investors’ appetite for risk as Israel razed a northern Gaza district.
The Dow Jones Industrial Average fell 177.6 points, or 0.53%, to 33,236.57, the S&P 500 lost 38.03 points, or 0.89%, to 4,239.97 and the Nasdaq Composite fell 157, 43 points, or 1.19%, to 13,028.74.
European shares extended their sell-off to end the week at their lowest level in seven months, as rising tensions in the Middle East, rising interest rates and disappointing earnings dampened investor risk appetite.
The pan-European STOXX 600 index lost 1.36% and MSCI‘s index of stocks around the world fell 0.87%.
Emerging market stocks lost 0.51%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.6% lower, while Japan’s Nikkei lost 0.54%.
Yields on 10-year U.S. Treasury bonds, the foundation of the global financial system, retreated after crossing the 5% level late Thursday but remained on track to post their biggest weekly gain since April 2022, as robust economic data continues to defy expectations. The Fed’s restrictive policy rates.
Benchmark 10-year bonds last rose 13/32 in price to yield 4.9328%, up from 4.988% late Thursday.
The 30-year bond last rose 7/32% in price to yield 5.0859%, up from 5.102% late Thursday.
The dollar briefly touched the closely watched 150 level against the Japanese yen on Friday, boosted by rising Treasury yields, and Powell hinted at the possibility of additional rate hikes.
The dollar was nominally lower against a basket of world currencies.
The dollar index fell 0.08%, while the euro rose 0.1% to $1.059.
The Japanese yen weakened 0.04% against the greenback at 149.86 per dollar, while the British pound last traded at $1.2153, up 0.08% on the day.
Oil prices fell modestly but rose for the second week in a row as the potential escalation of the war between Israel and Hamas fueled supply concerns.
US crude fell 0.69% to settle at $88.75 per barrel, while Brent settled at $92.16 per barrel, down 0.24% on the day.
Gold extended its advance, nearing key levels of $2,000 an ounce, as geopolitical tensions boosted the metal’s safe-haven appeal.
Spot gold added 0.3% to $1,979.69 an ounce.