• Home
  • Domestic bonds
  • S&P 500 nears 2-year low as 10-year Treasury yield climbs towards key 4% level

S&P 500 nears 2-year low as 10-year Treasury yield climbs towards key 4% level

By on October 11, 2022 0

U.S. stocks fell for a fifth day on Tuesday and bond yields soared as investors feared higher interest rates and lingering inflation could tip the economy into recession and hurt corporate profits.

The Dow Jones Industrial Average fell 4 points, or 0.02%. The S&P 500 and Nasdaq Composite fell to new 52-week lows, falling 1.08% and 1.65% respectively, hurt by weaker tech stocks such as Meta Platforms, whose lofty valuations are sensitive to rising rates. Semis also slipped, continuing a rout that began on Monday.

Bond prices also fell. The 10-year US Treasury yield rose about five basis points to 3.937% after approaching the key 4% level overnight. Bond yields are inverse to prices, and a basis point is one-hundredth of one percent.

The moves came as investors anticipate key inflation data that will indicate how aggressively the Federal Reserve will raise interest rates to keep inflation under control. On Wednesday, the producer price report will be released, followed by the consumer price index for September on Thursday. On Friday, September’s retail sales will give a better insight into consumption.

The trajectory of central bank interest rate hikes could push the US economy into recession, leading to lower corporate profits.

JPMorgan CEO Jamie Dimon warned on Monday that the United States is likely to fall into a recession over the “next six to nine months”, and said the S&P 500 could fall another 20% depending on whether the Federal Reserve organizes a soft or hard landing for the economy.

“This is a dreadful stock market environment that is grappling with a declining economy, uncertainty over earnings and the duration of Fed tightening, and sentiment issues with an extremely risk-averse investor psychology. “said David Bahnsen, Chief Investment Officer of The Bahnsen. Group, in a Tuesday note.

“We think the Fed will raise interest rates one or two more times until the fed funds rate hits 4%, then pause, at which time the Fed will assess the damage done,” he said. -he adds.

This week also kicks off earnings season. On Friday, JPMorgan, Wells Fargo, Morgan Stanley and Citi – four of the world’s largest banks – released their quarterly results.