THE WEEK ON WALL STREET
Rising bond yields and uncertainty over whether this was the close of the Fed’s rate-hike cycle dragged markets lower last week despite solid corporate earnings results.
The Dow Jones Industrial Average sank 1.61%, while the Standard & Poor’s 500 fell 2.39%. The Nasdaq Composite index, which has led for much of the year, slumped 3.16%. The MSCI EAFE index, which tracks developed overseas stock markets, retreated 1.67%.1,2,3
RISING YIELDS SINK STOCKS
Stocks rallied to start the week on earnings optimism before losing momentum over rising bond yields. Yields rose after traders speculated that strong economic data might persuade the Fed to raise rates. By mid-week, stocks turned lower as the 10-year Treasury yield moved above 4.9% for the first time since 2007, while mortgage rates hit 8%–the highest level since mid-2000.4
Stocks were under pressure Thursday as the 10-year Treasury yield moved closer to 5% and in response to comments from Fed Chair Powell that inflation remained too high. With the 10-year Treasury yield crossing above the 5% mark on Friday–and ahead of a weekend of uncertainty in the Middle East–stocks weakened further, ending a down week on a sour note.
1. The Wall Street Journal, October 20, 2023
2. The Wall Street Journal, October 20, 2023
3. The Wall Street Journal, October 20, 2023
4. CNBC, October 17, 2023