Japan’s headline inflation rate came in at 3% for September, slowing from the 3.2% rate in August. Bank of America strategist Ritesh Samadhiya noted the market could see a welcomed turnaround. Goldman Sachs analyst John Marshall said more than $2.2 trillion of notional options exposure will expire Friday, a figure that includes $425 billion of single stock options.
- Comerica fell 8.5% despite reporting better profit for the summer than expected.
- Dow stock Goldman Sachs (GS), on the other hand, fell 1.6% after earnings.
- Stronger-than-expected September retail sales sent government bond yields back toward recent highs.
- The S&P 500 and Nasdaq Composite are poised to end the week 2.1% and 2.8% lower, respectively.
Yields on fixed income instruments are exceeding the yield on S&P 500 index company earnings by an increasingly wider margin. “It just doesn’t make sense to own equities at elevated prices with the 10-year Treasury yielding near 5%,” according to Jose Torres, senior economist at Interactive Brokers. The 10-year yield traded close to 5% on Thursday, a level that has become one of Wall Street’s latest obsessions. Investors in both bonds and stocks are keeping a close eye on where the 10-year yield might be headed based on the notion that yields above 5% could heap more pressure on corporations and the U.S. economy.
“The hurdle for a [bond] rally is still high,” the strategists said in a Wednesday note. In Thursday comments in New York, Fed chief Jerome Powell said policymakers will let the bond market volatility play out, and that rising yields have helped tighten financial conditions. Currently, the CME FedWatch Tool shows markets are pricing in 98% odds of no hike at the Fed’s November 1 meeting, and a 24% chance of a 25 basis point hike in December. Despite the panic in markets, trends from decades past suggest that yields are pretty much right in line with expectations for the economy over the medium-term. With bond yields at elevated levels, it is the best for active management instead of passive investing, said Torres. From the technical perspective, Torres said he expects the 10-year Treasury yield to test 5.29% in the next few months.
The central bank official added that she agrees with Federal Open Market Committee estimate in September that another rate hike could come before the end of 2023, but noted that handicapping such moves is difficult now. “Building on the Barbie phenomenon, Mattel has a number of films and TV shows in development, with the aim to grow the value of its IP portfolio and compete with growing alternatives for children’s attention.” The unprecedented success of the “Barbie” movie could propel Mattel stock upwards for years to come, according to Citi. The S&P 500 and Nasdaq Composite are poised to end the week 2.1% and 2.8% lower, respectively. “Despite macro uncertainty, Cognizant has seen solid bookings momentum since late 2022 and we expect these trends to continue in 3Q23 with a healthy large deal pipeline remaining,” analyst Ashwin Shirvaikar said.
- By adding duration, investors avoid the problem of reinvestment risk — that is, running out of places to obtain competitive yields once their short-term fixed income investments mature.
- Kiplinger is part of Future plc, an international media group and leading digital publisher.
- The Invesco Solar ETF (TAN) tumbled 5.6% Friday to its lowest level since July 2020, led down by Solaredge.
- The company blamed order cancellations in Europe due in part to slower-than-expected installation rates.
“You can go more intermediate — 4 or 5 years — and start to lock in what are very attractive yields from a near-term perspective, but fairly attractive even from a longer term.” Traders are closely watching the 10-year Treasury yield to see if it finally hits 5% — a first since 2007 — but eagle-eyed investors with a long-term perspective may find some solid bargains if they know where to look. Core inflation — which strips out prices of fresh food — also slowed to 2.8%, down from 3.1% in August. The pan-European Stoxx 600 index opened 0.7% down, with most sectors in negative territory. Mining stocks saw the biggest drop with a 1.5% decline, followed by household goods, which fell 1.3%. Bitcoin is on track to post its biggest weekly gain in about four months.
Bullishness among individual investors below average for fifth week in six
Higher yields also make it more expensive for nearly everyone to borrow money, which puts the brakes on economic growth. While they offer an interest rate of just 2.5 percent, compared with 4.3 percent for I bonds, there is a sweetener. Hold on to EE bonds for 20 years and the government guarantees you will double your money. This amounts to an effective, unadvertised interest rate of about 3.6 percent, but only if you keep the bonds that long. While I bond yields are now higher, they reset every six months.
HONG KONG (AP) — Asian shares retreated Friday as the prospect of a 5% yield on the 10-year U.S. Treasury for the first time since 2007 added to pressure on Wall Street. It’s been a rough stretch for VFC stock, which is down 33% for the year-to-date.
Gold hits 3-month peak, on pace for second straight weekly gain
The offers comprise 6 million barrels, scheduled for delivery between December of this year and January 2024. The last time the Biden administration announced such purchase intentions was in July. Stronger-than-expected September retail sales sent government bond yields back toward recent highs. The yield on the benchmark 10-year Treasury crossed 5% for the first time in 16 years on Thursday, a level that could ripple through the economy by raising rates on mortgages, credit cards, auto loans and more.
Stock indexes fall with Nasdaq losing 1.6%, Dow dropping more than 300 points
The core inflation rate, which excludes volatile fresh food prices, rose 2.8% from a year earlier in September. Investors have paid particularly close interest to bond yields this week as the 10-year U.S. Treasury yield crossed the 5% level for the first time since 2007. Going forward, Grecsek said the bond market will need to become less volatile for the stock market to. As the centerpiece of the global financial system, Treasury yields help dictate how much investors pay for everything from stocks to corporate bonds to cryptocurrencies.
“In order for the equity market to really stabilize and consolidate here, the rate volatility’s got to calm down a little bit. And it’s going to be hard for equities to really settle down until that happens.” The stock market likely won’t stabilize until the bond market does, according to David Grecsek, managing director of investment strategy and research at Aspiriant. Following a broader selloff amongst solar stocks, Deutsche Bank delivered another blow to the downtrodden industry as it downgraded three names. ET Thursday, the first time it has traded above that level since July 2007. The treasury shares are the former outstanding shares that have been repurchased and are held by the issuing company. When Treasury stocks are retired, they’re not allowed to be sold and are therefore withdrawn from the market.
Fewer U.S. workers applied for unemployment benefits last week than expected, which indicates low levels of layoffs across the country. On the earnings front, Bank of America (BAC, +2.3%) and Bank of New York Mellon (BK, +3.8%) closed higher after both financial firms reported higher-than-expected third-quarter earnings. The oilfield services provider posted $8.31 billion in revenue for the quarter, below the consensus estimate of $8.33 billion from analysts polled by LSEG, formerly known as Refinitiv. Schlumberger reported 78 cents earned per share, beating the analyst forecast by 1 cent.
There were treasures elsewhere in the investment-grade bond market. Tax-free municipal bonds were paying more than 6 percent, and corporate bonds carried rates that were even higher. Comerica fell 8.5% despite reporting better profit for the summer than expected. Huntington Bancshares sank 3.9% after likewise topping earnings forecasts. Escalating conflict in the Middle East is fueling supply concerns, with a barrel of benchmark U.S. crude rising further 96 cents to $89.33 per barrel in electronic trading on the New York Mercantile Exchange.
What is the price of oil today?
I think that it’s really a stock pickers environment and choosing the right companies and the right sectors that are set to thrive at the right time,” Torres said. Hatfield is more optimistic, expecting the 10-year Treasury the elevator speech yield to peak at around 5%. Investors are also digesting a slew of earnings reports from companies, including Tesla, which missed analyst’s profit and revenue estimates, and Netflix, which beat expectations.