10-Year Treasury Yield Hovers Around Milestone 5% Level, Adding Pressure to Stocks

The Invesco Solar ETF (TAN) tumbled 5.6% Friday to its lowest level since July 2020, led down by Solaredge. Other stocks in the solar sector also fell on the pessimistic outlook. Enphase Energy and U.S.-traded shares of SMA Solar Technology fell more than 12%, followed by SunPower down 11.4%. While worries about higher Treasury yields and the war in Gaza weigh on markets, support also remains from strength for corporate profits and the overall U.S. economy.

  • “We’re gonna have much more subdued stock market performance in the next five to 10 years, with rates that high.
  • Money-market funds aren’t insured by the government, but they hold government securities, especially Treasuries.
  • Following a broader selloff amongst solar stocks, Deutsche Bank delivered another blow to the downtrodden industry as it downgraded three names.
  • While they offer an interest rate of just 2.5 percent, compared with 4.3 percent for I bonds, there is a sweetener.

“With the current macro environment uncertain, we believe Pharma stocks with high near-term growth and relatively lower downside risk should outperform lower-growth peers,” wrote analyst Trung Huynh. “Merck encompasses these attributes with solid growth ( E EPS 4.8% vs. peers’ 2.6%), driven by Keytruda and Gardasil entering a consistent growth phase and largely unaffected by IRA Medicare price negotiation until 2028.” Enphase Energy is the biggest laggard on the tech-heavy index, tumbling more than 19% since the start of the week. Moderna’s slumped more than 17%, while Lucid Group and Tesla are slated to drop more than 14% each for the week. Tesla fell 9% on Thursday after the electric vehicle stock reported disappointing results and shares cautious commentary. The index traded near the 200-day earlier this month, but appeared to bounce off the level.

The bank also missed estimates for net interest income and net interest margin. And Regions warned that it expected net interest income to decline in the fourth quarter. The Dow fell 200 points on Friday career paths outside of accounting and headed for a 1.4% weekly decline, led to the downside by a 7.8% drop in shares of Walgreens Boots Alliance. “The bond market actually has been the leading indicator for the equity market,” he said.

Chevron buying Hess, Apple shares slip

Still, the Fed’s most aggressive rate-hike cycle since the 1980s is likely over, as a steeper curve and term premium have “done the job for them” in tightening policy, he said. Whether that’s a brilliant purchase, or one you might regret in a few years because interest rates have moved much higher, is a question I can’t answer. It may be tempting to buy a 20-year Treasury with a yield of more than 5.2 percent, with the intention of holding it to maturity. Along with plenty of caveats, here are further ideas for bond investing. And if you were especially lucky with your timing and bought that bond in early November 1994, you could have gotten more than 8 percent interest annually.

“Yields are rising, even with the relatively good news about inflation. This is the primary reason the stock market has been weak.” The type of stock that the issuing company acquires is treasury stock. As long as the issuer holds the shares, they are considered to be issued but not outstanding and are not taken into account in the valuation of the outstanding shares. A firm offers to buy back its shares from existing shareholders at a price that it is willing to pay. Generally speaking, this fixed price is higher than the market price. The company shall also disclose the period of validity of the repurchase offer.

Meanwhile, the 30-year fixed mortgage rate reached 8% this week, a level not seen since 2000. With the move to buy back shares (treasury stocks), the financial ratios get altered. Return ratios, such as return on assets (ROA) and return on equity (ROE), may increase if these shares are retired permanently.

Powell’s speech comes as the 10-year US Treasury yield approaches 5%. The yield hit a high of 4.98% on Thursday, representing its highest level since June 2007. While Khanduja is eyeing 5% as a decent entry point, he also has a steepener trade among his favored bets. Morgan Stanley Investment is positioned for the yield curve between the two and 10-year bonds to steepen. US 10-year yields have soared over 30 basis points this week and reached 4.98% on Thursday, the highest since July 2007. Traders are looking to Fed Chair Jerome Powell’s upcoming remarks at the Economic Club of New York to shed more light on the policy outlook.

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Separately, the so called “core-core” inflation metric, which strips out prices of fresh food and energy and is watched by the BOJ, fell to 4.2% from 4.3% in August. China kept benchmark loan rates unchanged for October, after the slowdown in the world’s second-largest economy showed signs of stabilization following recent policy support. With just Friday’s session left in the trading week, stocks are on pace to finish lower.

Retention of Shares

Preferred shares, which pay a fixed dividend to shareholders, could be a good choice, and investors may choose to add some tech stocks with their earnings reports coming next week. Still, Hatfield said he wouldn’t make any big moves in the current market environment. “We are bullish about rates and the stock market but things are dicey. And positive inflation data won’t arrive until November,” he added.

Outflows seen from high-grade bond funds,

That will be the largest monthly options expiration for any October tracked, he said. The stock market may experience volatility on Friday as what is believed to be the largest volume of October expirations on record take place. The key part of the yield curve initially inverted in March 2022, a phenomenon that has historically been a reliable recession predictor. Many on Wall Street, including DoubleLine Capital CEO Jeffrey Gundlach, believe that when the curve starts to de-invert, an economic downturn could be imminent. Shares of the stock have slid more than 9% since the start of the year.

The stock market has been struggling under the weight of the bond market, where the yield on the 10-year Treasury briefly topped 5% late Thursday for the first time since 2007, according to Tradeweb. High yields make borrowing more expensive for everyone, and they slow the economy while dragging on prices for stocks and other investments. Tokyo’s Nikkei 225 index lost 0.5% to 31,266.84 after the government reported that consumer inflation was higher than expected in September.

Overall, analysts expect companies across the S&P 500 index to report slight growth in their earnings per share for the summer versus a year earlier. A separate report, though, said manufacturing in the mid-Atlantic region is weakening by more than economists expected. And a third said sales of previously occupied homes fell last month, though not by as much as economists expected. China announced on Friday it was keeping its benchmark lending rates unchanged, with the one-year loan prime rate unchanged at 3.45% and the five-year LPR at 4.20%, in line with market expectations. As for the major indexes, the rate-sensitive Nasdaq Composite was the worst performer – shedding 0.3% to 13,533 as yields on the 2-year and 10-year Treasuries headed back toward levels not seen in nearly two decades. The broader S&P 500 ended marginally lower at 4,373, while the blue chip Dow Jones Industrial Average eked out a 0.04% gain to 33,997.

But a rise in oil prices is threatening to add more upward pressure. Crude prices remained volatile amid worries about war in the Middle East. High yields hurt all kinds of stocks, but they hit particularly hard on those bid up on expectations for big growth far in the future and those seen as very expensive. That’s often put the spotlight on Big Tech recently, and some reported a mixed set of profits. Stocks were notably lower in early trading Tuesday as investors took in the latest retail sales data and another batch of bank earnings.

Dow closes nearly 300 points lower after 10-year Treasury yield tops 5% for the first time since 2007: Live updates

Nvidia (NVDA) was another notable decliner today, with the semiconductor stock slumping 4.7% after the U.S. said it will expand restrictions on sales of artificial intelligence (AI) chips to China. European equity markets opened at a seven-month low Friday, Reuters data shows, as investors digest comments out of the U.S. and global sentiment stutters. Gold climbed to a three-month peak on Friday, putting it on pace for a second straight weekly rise as fears of heightening conflict in the Middle East pushed investors towards safe-haven assets. McDonald’s is on track to post the largest weekly jump of the group, with shares up 4%.


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