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Tag: U.S. 10 Year Treasury Note

  • The Nasdaq just fell into a correction. Now what?

    The Nasdaq just fell into a correction. Now what?

    The Nasdaq Composite Index fell into its 70th correction in history on Wednesday, as surging long-term Treasury yields increased borrowing costs and weighed on stocks.

    The interest rate sensitive Nasdaq
    COMP
    barreled higher in the year’s first half, in part on optimism about a potential Federal Reserve pivot away from rate hikes to fight inflation, but stocks have been under fire in recent months as the Fed dialed up its message that interest rates could will stay higher for longer.

    The tech-heavy equity index fell 2.4% on Wednesday to close below the 12,922.216 threshold, marking a drop of a least 10% from its prior peak, which was set in mid-July at 14,358.02, according to Dow Jones Market Data.

    That met the common definition for a correction in an asset’s value and is the Nasdaq’s 70th close in correction territory since the index’s inception in February 1971.

    Robert Pavlik, senior portfolio manager at Dakota Wealth Management, said the sharp rise in long-term Treasury yields has spooked investors, especially those in highflying, high-growth technology stocks where rising rates can be particularly corrosive.

    Pavlik likened the dynamic to the spending power of a lottery winner hitting a jackpot when rates are at 2% versus someone who wins when rates are closer to 10%.

    He also expects the 10-year Treasury yield
    BX:TMUBMUSD10Y,
    which rose to 4.952% Wednesday, to top out at 5.25% to 5.5% and likely complicate any recovery for the Nasdaq.

    In the past 20 corrections for the Nasdaq, it took an average of three months for performance to improve, with index then gaining 14.4% on average a year later, according to Dow Jones Industrial Average.

    Nasdaq corrections are usually followed by a bounce in a few months


    Dow Jones Market Data

    The damage on Wednesday was most acute in shares of highflying technology stocks, including Alphabet Inc.
    GOOG,
    -9.60%
    as shares skid 9.5%, after it reported earnings that were overshadowed by downbeat performance for its Google Cloud business. Spillover also hit shares of rival cloud computing giant Amazon.com Inc.,
    AMZN,
    -5.58%
    with its shares slumping 5.6%

    “You’re feeling the pressure in some big-name stocks,” Pavlik said. “But this too will, at some point, end. But concerns about the Fed are still in the forefront of everybody’s minds.”

    The Nasdaq was still up 22.5% on the year through Wednesday, while the Dow Jones Industrial Average
    DJIA
    was down 0.3% and the S&P 500 index
    SPX
    was up 9% in 2023, according to FactSet.

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  • Equity strategist who called stock rally in first half says S&P 500 won’t resume climb until spring 2024

    Equity strategist who called stock rally in first half says S&P 500 won’t resume climb until spring 2024

    A Wall Street strategist who foresaw the U.S. stock-market rally in the first half of the year now sees stocks treading water through the end of 2023, unlikely to extend the previous momentum until at least April 2024. 

    Barry Bannister, chief equity strategist at Stifel, extended his 4,400 target for the S&P 500
    SPX
    to April 2024 from the end of this year, as higher interest rates could pressure corporate earnings, weighing on stock prices, he said.

    “We believe the rally off the Oct. 2022 lows is over, and our view since summer 2023 has been a sideways trading range,” Bannister said in a Monday note. “The updated view is that we now believe our year-end 2023 target of 4,400 applies through Apr. 30, 2024.”

    Bannister was one of the few Wall Street strategists who correctly anticipated the U.S. stock-market rally in the first half of 2023. He also said economic risk for equities will rise in late 2023 as stock gains would stall in the second half of the year. He set his 4,400 year-end target for the S&P 500 in May, a roughly 4.3% advance from Monday’s close of 4,217.04, according to FactSet data.

    “We traded the relief rally [in early 2023], turned neutral in summer 2023 and discouraged bullishness before the third quarter of 2023,” Bannister said. He said he thinks a new record-high for the S&P 500 by year-end 2023, as some of the most bullish strategists on Wall Street have projected, is “exceptionally unlikely.”

    See: S&P 500 has another high 2023 price target. Here’s a look at Wall Street’s official stock-market outlook.

    Meanwhile, Bannister thinks the key 10-year U.S. Treasury yield
    BX:TMUBMUSD10Y
    will peak around 5% in the current cycle, but he projects a “normalized” 10-year yield of 5% or 6% in the mid-2020s, which could put pressure on corporate earnings.

    The 10-year Treasury yield flirted with 5% on Monday for the first time since 2007, touching an intraday high of 5.02% in the morning trading before retreating to finish the New York session at 4.836%, according to Dow Jones Market Data. 

    “It is not ‘Fed high for longer’ — the Fed has returned to ‘policy modulation at normalized rates,’” Bannister wrote. 

    Bannister also pointed to the health of the U.S. labor market as a source of economic resilience and a reason for “the Fed rate normalization,” which could tighten financial conditions and weigh on price-to-earnings ratios for stocks. 

    The price-to-earnings ratio, sometimes known as the price multiple, is a ratio of a stock price divided by a public company’s yearly earnings per share. It is a way to determine stock valuation.

    That’s why the strategist sees the S&P 500 will remain flat or “range-bound” for the rest of the 2020s decade as price-to-earnings ratios across U.S. firms will be halved due to tightening financial conditions, but it could offset growth in earnings-per-share (EPS). Bannister forecasts the S&P 500 EPS will at least double from $156 in 2019 to a range of $300-325 in 2030. 

    EPS is a company’s net profit divided by the number of common shares it has outstanding, and it usually indicates how much money a company makes for each share of its stock.

    U.S. stocks finished mostly lower on Monday, with the Dow Jones Industrial Average
    DJIA
    down 190 points, or 0.6%, to end at 32,936, but the Nasdaq Composite
    COMP
    edged up 0.3%, according to FactSet data.

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  • Why Bill Gross expects a U.S. recession to begin by year’s end

    Why Bill Gross expects a U.S. recession to begin by year’s end

    Bill Ackman isn’t the only boldfaced Wall Street name who believes the U.S. economy is in worse shape than the official data suggest.

    See: Bill Ackman cashes out bet against Treasury bonds as yields hit 16-year highs

    Bill Gross, a co-founder of fixed-income investing giant Pacific Investment Management Co., said Monday in a post on social-media platform X that the U.S. economy is likely headed for a recession by year’s end.

    “Regional bank carnage and recent rise in auto delinquencies to long-term historical highs indicate U.S. economy slowing significantly. Recession in 4th quarter,” Gross said.

    Such an outcome would represent a remarkable turnaround, considering the Atlanta Federal Reserve’s GDP Now real-time indicator shows the U.S. economy expanding at a 5.4% annualized clip during the third quarter. Official GDP data is due Thursday, with economists polled by The Wall Street Journal looking, on average, for a 4.5% annualized growth figure.

    Many Wall Street economists had anticipated that the U.S. recession would slide into recession earlier this year. However, strength in construction, consumer spending and other areas has helped it defy expectations, as data show it has instead continued to expand at a solid pace.

    Revised data released last month by the Commerce Department showed the U.S. economy grew by 2.1% during the second quarter. Typically, investors only become aware of recessions in hindsight after they’ve been officially declared by the National Bureau of Economic Research.

    Rising auto-loan delinquencies are an alarming portent of economic pain to come, Gross said, citing data from Fitch Ratings, reported by Bloomberg News on Friday, which showed the percentage of subprime auto loans more than 60 days delinquent surpassed 6% in September. At 6.1%, it’s the highest rate ever recorded by the data series going back to 1994.

    As far as how investors might play this, Gross said he’s “seriously considering” investing in shares of regional banks, which have fallen substantially this year: the SPDR S&P Regional Banking ETF
    KRE,
    one popular exchange-traded fund tracking regional players down more than 30% year-to-date. He also touted some merger-arbitrage plays, a strategy he endorsed in a recent investment outlook.

    He also recommended betting that the Treasury curve will continue steepening as it looks to break out of negative territory for the first time in more than a year. Rising long-term rates have nearly caught up with short term rates, with the 10-year yield
    BX:TMUBMUSD10Y
    within 30 basis points of the 2-year yield
    BX:TMUBMUSD02Y
    on Monday.

    10-year yields have been lower than 2-year yields for 327 days, according to Dow Jones Market Data. That’s the longest stretch since the 444-trading day streak that ended May 1, 1980.

    Gross is using interest-rate futures for his steepening trade. He expects the curve will re-enter positive territory before the end of the year as a slowing economy forces investors to adjust their expectations regarding the timing of Federal Reserve interest-rate cuts.

    “’Higher for longer’ is yesterday’s mantra,” Gross said.

    Following a decadeslong career on Wall Street, Gross announced his retirement a few years back after a stint at Janus Capital Group. He joined Janus after a contentious exit from Pimco.

    Nevertheless, Gross has continued to share his views on markets in posts on X, as well as in investing outlook letters published to his website, and during interviews with the financial press.

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  • Jim Jordan dropped as speaker nominee by House Republicans, who plan for new pick next week

    Jim Jordan dropped as speaker nominee by House Republicans, who plan for new pick next week

    House Republicans voted Friday in a secret ballot against keeping Rep. Jim Jordan as their nominee for speaker, and they planned to determine a new nominee next week.

    The Ohio congressman had been facing resistance in his bid to become speaker, with the number of fellow Republicans voting against him rising to 25 in a third round of voting Friday on the House floor, up from 22 in a prior ballot. 

    House GOP lawmakers were expected to meet Monday evening for a new forum for speaker candidates. Rep. Kevin Hern of Oklahoma said in a post on X that he was running for the job, and Rep. Jack Bergman of Michigan has indicated he’ll seek the post as well.

    The GOP opposition to Jordan stemmed from a range of concerns, including that his speakership could lead to cuts in defense
    ITA
    spending, as well as the view that he didn’t provide enough support for the speaker bid of House Majority Leader Steve Scalise, a Louisiana Republican. Jordan’s Republican opponents also said they’ve faced death threats for their stance, with Rep. Drew Ferguson of Georgia saying Thursday that the House GOP “does not need a bully as the Speaker.”

    Analysts have been warning that the process of picking a new speaker is preventing the Republican-run House from addressing crucial matters, such as supporting Israel and passing a budget to avoid a government shutdown next month that could rattle markets. It has been 17 days since the historic ouster of former Speaker Kevin McCarthy, a California Republican.

    Related: Israel, Ukraine aid could run up against House dysfunction, making for ‘tragedy,’ analyst says

    And see: Biden seeks $14 billion for Israel, $61 billion for Ukraine in request to Congress

    With the House looking rudderless for more than two weeks, the chamber’s temporary speaker, GOP Rep. Patrick McHenry of North Carolina, has faced calls to take on the job more permanently. But a measure that would have McHenry serve in the post until January stalled on Thursday afternoon due to objections from a number of Republicans, even as Jordan offered his support for it.

    U.S. stocks
    SPX

    DJIA

    COMP
    were losing ground Friday, as rising bond yields
    BX:TMUBMUSD10Y
    and geopolitical tensions continue to take a toll. 

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  • Jim Jordan dropped as speaker nominee by House Republicans, who plan for new pick next week

    Jim Jordan dropped as speaker nominee by House Republicans, who plan for new pick next week

    House Republicans voted Friday in a secret ballot against keeping Rep. Jim Jordan as their nominee for speaker, and they planned to determine a new nominee next week.

    The Ohio congressman had been facing resistance in his bid to become speaker, with the number of fellow Republicans voting against him rising to 25 in a third round of voting Friday on the House floor, up from 22 in a prior ballot. 

    House…

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  • Why strategists see 10-year Treasury yield breaching 5% despite Friday’s pullback

    Why strategists see 10-year Treasury yield breaching 5% despite Friday’s pullback

    The 10-year Treasury yield continued to pull back from 5% on Friday after moving tantalizingly close to surpassing that level in the previous session.

    The yield touched 5% at 5:02 p.m. Eastern time on Thursday, only to drift back down, according to Tradeweb data. It ended Friday’s New York session down by 6.3 basis points at 4.924%.

    Rising Middle East tensions gave way to renewed safe-haven demand in government debt on Friday that not only sent the 10-year yield
    BX:TMUBMUSD10Y
    lower, but dragged down rates on everything from 3-month Treasury bills
    BX:TMUBMUSD03M
    to the 30-year bond
    BX:TMUBMUSD30Y.

    Investors were trying to catch the proverbial falling knife by taking advantage of a cheaper 10-year Treasury note, the product of recent selloffs. Analysts warn that it’s difficult to have much short-term conviction in catching that knife, however, given the likelihood that the selloff could return.

    One big reason is the onslaught of new supply from the U.S. Treasury as the result of the government’s growing borrowing needs, which is raising the risk that investors will keep demanding more compensation to hold long-dated debt to maturity.

    On Oct. 30 and Nov. 1, which is the same day as the Federal Reserve’s next policy decision, Treasury is expected to provide updated guidance on its borrowing needs and auction sizes. Treasury’s refunding announcement could even upstage the Federal Open Market Committee — creating “fertile ground for a continuation of the selloff in Treasuries,” said BMO Capital Markets rates strategists Ian Lyngen and Ben Jeffery.

    Over the next several weeks, “it becomes much easier to envision a surge in Treasury yields in anticipation of the upcoming coupon supply,” they wrote in a note on Friday. While the 10-year yield has stopped shy of 5%, “we continue to expect this milestone will be reached shortly.”

    Stock-market investors have been focused on the prospects of a 5% 10-year yield because such a level would dent the appeal of equities and make government debt a more attractive investment by comparison.

    Read: Why stock-market investors are fixated on 5% as 10-year Treasury yield nears key threshold

    As of Friday, the 10-year yield, used as the benchmark on everything from mortgages to student and auto loans, has jumped 163.9 basis points from its 52-week low of almost 3.29% reached on April 5. The 10-year yield hasn’t ended the New York session above 5% since July 19, 2007.

    Meanwhile, all three major stock indexes
    DJIA

    SPX

    COMP
    ended the day lower as the prospects of a widening conflict in the Middle East triggered a flight-to-safety trade into Treasurys.

    Taking a step back, a 5% 10-year yield would imply that a Goldilocks-scenario of a U.S. economy — one that’s neither too hot or too cold, and able to sustain moderate growth — “is here to stay for a decade,” or that the Fed’s main interest-rate target needs to be materially higher on average over the next decade, according to BMO’s Lyngen and Jeffery. One of the biggest questions facing policy makers is whether the economy might be moving into a new stage in which even higher interest rates down the road could be required to cool demand and activity.

    Though BMO Capital Markets is biased toward lower yields into the weekend given the absence of major economic data on Friday, technical indicators “continue to favor higher rates in the near-term,” and “our conviction that 5% will ultimately be traded through has grown.”

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  • House speaker election: Jim Jordan loses in third ballot as Republican opposition grows again

    House speaker election: Jim Jordan loses in third ballot as Republican opposition grows again

    Rep. Jim Jordan continued to face resistance Friday in his bid to become the next speaker of the U.S. House of Representatives, with the number of fellow Republicans voting against the Ohio congressman rising to 25 in a third ballot, up from 22 in the prior ballot.

    House GOP lawmakers were slated to hold a meeting around 1 p.m. Eastern Friday, and there were expectations they would vote on whether Jordan should continue to be their nominee for speaker.

    Jordan hasn’t sounded like he’s close to throwing in the towel, as he indicated at a news conference before the third round of voting that he planned to keep pushing.

    “There’s been multiple rounds of votes for speaker before,” he said during the news conference, referring to how former Speaker Kevin McCarthy needed 15 ballots to secure the job in January.

    “Our plan this weekend is to get a speaker elected to the House of Representatives as soon as possible so we can help the American people,” he also said.

    Jordan — an ally of former President Donald Trump and co-founder of the hardline House Freedom Caucus — had 22 GOP lawmakers vote against him in a second ballot on Wednesday. On Tuesday, 20 fellow Republicans backed other candidates in an initial round of voting.

    Jordan needs a simple majority of House lawmakers to back him in order to become speaker of the narrowly divided chamber, which has 221 Republicans and 212 Democrats, with two vacancies. That would have been 215 votes in the third ballot as there were some absences Friday.

    All 210 Democrats present Friday voted for their nominee, House Minority Leader Hakeem Jeffries, while 194 Republicans backed Jordan and 25 GOP lawmakers supported other candidates.

    Analysts have been warning that the process of picking a new speaker is preventing the Republican-run House from addressing crucial matters, such as supporting Israel and passing a budget to avoid a government shutdown next month that could rattle markets. 

    Related: Israel, Ukraine aid could run up against House dysfunction, making for ‘tragedy,’ analyst says

    And see: Biden seeks $14 billion for Israel, $61 billion for Ukraine in request to Congress

    With the House looking rudderless for more than two weeks, the chamber’s temporary speaker, GOP Rep. Patrick McHenry of North Carolina, has drawn calls to take on the job more permanently. But a measure that would have McHenry serve in the post until January stalled on Thursday afternoon due to objections from a number of Republicans, even as Jordan offered his support for it.

    “This resolution is really dangerous. We need to have a NORMAL election for speaker. @Jim_Jordan, I respect you but it is a massive mistake to back this,” GOP Rep. Anna Paulina Luna of Florida said Thursday in a post on X as the measure lost momentum.

    Given the GOP opposition, the McHenry option would require some Democratic support. Jeffries, a New York Democrat, has continued to signal openness to it.

    “Conversations hopefully will intensify today, perhaps continue throughout the weekend, and get us to a place where we can reopen the House no later than Monday of next week,” Jeffries told reporters on Friday after the third ballot.

    The GOP opposition to Jordan stems from a range of concerns, including that his speakership could lead to cuts in defense
    ITA
    spending, as well as the view that he didn’t provide enough support for the speaker bid of House Majority Leader Steve Scalise. Jordan’s Republican opponents also have said they’ve faced death threats for their stance, with Rep. Drew Ferguson of Georgia saying Thursday that the House GOP “does not need a bully as the Speaker.”

    Republican Rep. Matt Gaetz of Florida, who led the drive to oust McCarthy from his post more than two weeks ago, said he and the other GOP lawmakers who opposed McCarthy have made an offer to their colleagues who aren’t supporting Jordan, in an effort to get them to switch their votes.

    “The eight of us have said that we are willing to accept censure, sanction, suspension, removal from the Republican conference,” Gaetz told reporters after the third ballot, adding that the group will continue to vote with Republicans.

    Another Jordan supporter, GOP Rep. Bob Good of Virginia, said the Ohioan should stick with his bid, noting McCarthy went through many rounds.

    “We believe if we keep voting Jim Jordan will be elected speaker,” Good told reporters.

    U.S. stocks
    SPX

    DJIA

    COMP
    were losing ground Friday, as rising bond yields
    BX:TMUBMUSD10Y
    and geopolitical tensions continue to take a toll. 

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  • Selloff in Treasurys gains momentum in late afternoon, pushing 3-month through 30-year yields either further above or toward 5%

    Selloff in Treasurys gains momentum in late afternoon, pushing 3-month through 30-year yields either further above or toward 5%

    Tuesday’s selloff in U.S. government debt picked up steam in the late afternoon, sending most Treasury yields either further above or toward 5%. The jump in market-implied rates was led by 3- through 7-year yields, which each rose by 17 basis points, according to FactSet data. The benchmark 10-year rate was up 14.4 basis points at 4.853% after September’s stronger-than-expected retail sales report, and is on pace for its largest one-day jump since at least Sept. 21. Two- and 10-year yields are both heading for their highest closing levels in 16 to 17 years.

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  • Homes are expensive right now, but these mortgage bonds look cheap

    Homes are expensive right now, but these mortgage bonds look cheap

    U.S. homes may be wildly unaffordable for first-time buyers, but mortgage bonds backed by those same properties could be dirt cheap.

    Shocks from the Federal Reserve’s dramatic rate increases have walloped the $8.9 trillion agency mortgage-bond market, the main artery of U.S. housing finance for almost the past two decades.

    Spreads, or compensation for investors, have hit historically wide levels, even through the sector is underpinned by home loans that adhere to the stricter government standards set in the wake of the subprime-mortgage crisis.

    Bond prices also have tumbled, sinking from a peak above 106 cents on the dollar to below 98, despite guarantees that mean investors will be fully repaid at 100 cents on the dollar.

    From $106 to $98 cents, agency mortgage-bond prices are falling.


    Bloomberg, Goldman Sachs Global Investment Research

    “It’s really, really struggled,” Nick Childs, portfolio manager at Janus Henderson Investors, said of the agency mortgage-bond market during a Thursday talk on the firm’s fixed-income outlook.

    Yet Childs and other investors also see big opportunities brewing. While mortgage bonds have gotten cheaper with the sector’s two anchor investors on the sidelines, the stalled housing market should breed scarcity in the bonds, which could help lift the sector out of a roughly two-year slump.

    Prices have tumbled since rate shocks hit, but also since the Fed continued winding down its large footprint in the sector by letting bonds it accumulated to help shore up the economy roll off its balance sheet.

    Banks awash in underwater securities have pulled back too. The repricing of similar bonds helped hasten the collapse of Silicon Valley Bank in March.

    “Banks have been not only absent, but selling,” said Childs, who helps oversee the Janus Henderson Mortgage-Backed Securities exchange-traded fund
    JMBS,
    an actively managed $2 billion fund focused on highly rated securities with minimal credit risk.

    “But we’re moving into an environment where supply continues to dwindle,” he said, given anemic refinancing activity and the dearth of new home loans being originated since 30-year fixed mortgage rates topped 7%.

    The bulk of all U.S. mortgage bonds created in the past two decades have come from housing giants Freddie Mac
    FMCC,
    +0.66%    ,
    Fannie Mae
    FNMA,
    +1.09%
    and Ginnie Mae, with government guarantees, making the sector akin to the $25 trillion Treasury market. But unlike investors in Treasurys, investors in mortgage bonds also earn a spread, or extra compensation above the risk-free rate, to help offset its biggest risk: early repayments.

    While homeowners typically take out 30-year loans, most also refinanced during the pandemic rush to lock in ultralow rates, instead of continuing to make three decades of payments on more expensive mortgages. If someone refinances, sells or defaults on a home, it leads to repayment uncertainty for bond investors.

    “To put this another way, the biggest risk to mortgages is now off the table, yet spreads are at or near historic wides,” said Sam Dunlap, chief investment officer, Angel Oak Capital Advisors, in a new client note.

    That spread is now far above the long-term average, topping levels offered by relatively low-risk investment-grade corporate bonds.

    Agency mortgage bonds are offering far more spread that investment-grade corporate bonds. But these mortgage bonds will fully repay if borrowers default.


    Janus Henderson Investors

    Agency mortgage bonds typically are included in low-risk bond funds and can be found in exchange-traded funds. While they have been hard hit by the sharp selloff in long-dated Treasury bonds
    BX:TMUBMUSD10Y

    BX:TMUBMUSD30Y,
    there has also been hope that the worst of the storm could be nearly over.

    Goldman Sachs credit analysts recently said they favored the sector but warned in a weekly client note that it still faces “high rate volatility and a dearth of institutional demand.”

    As evidence of the U.S. bond selloff, the popular iShares 20+ Year Treasury Bond ETF
    TLT
    recently sank to its lowest level in more than a decade. It also was on pace for a negative 10% total return on the year so far, according to FactSet. Janus Henderson’s JMBS ETF was on pace for a negative 2.7% total return on the year through Friday.

    “Frankly, why they fit portfolios so well is that because the government backs agency mortgages, there is no credit risk,” Childs said. “So if a borrower defaults, you get par back on that. It just comes through as a typical payment.”

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  • Dow Jones ekes out gain Friday, stocks mostly advance for the week as Israel-Gaza war escalates

    Dow Jones ekes out gain Friday, stocks mostly advance for the week as Israel-Gaza war escalates

    U.S. stocks closed mostly lower Friday, but the Dow Jones and S&P 500 posted weekly gains, as the Israel-Gaza war appeared to escalate heading into the weekend. The Dow Jones Industries
    DJIA,
    +0.12%
    rose about 39 points, or 0.1%, on Friday, ending near 33,670, according to preliminary FactSet data. The S&P 500 index
    SPX,
    -0.50%
    fell 0.5% and the Nasdaq Composite Index
    COMP,
    -1.23%
    closed 1.2% lower. The S&P 500’s energy segment outperformed Friday, gaining 2.3%, as U.S. benchmark crude surged nearly 6% after Israel ordered more than a million people in Gaza to evacuate to the south. Treasury yields fell, with the 10-year Treasury
    TMUBMUSD10Y,
    4.626%
    rate retreating to 4.628% Friday, snapping a 5-week yield climb, according to Dow Jones Market Data. Bond prices and yields move in the opposite direction. Investors bought other haven assets too, including gold
    GC00,
    +0.23%
    and the U.S. dollar
    DXY,
    +0.07%    .
    Wall Street’s “fear gauge”
    VIX,
    +15.76%
    also touched its highest level in more than a week. Even so, the Dow Jones booked at 0.8% weekly gain, the S&P 500 advanced 0.5% and the Nasdaq fell 0.2%.

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  • U.S. stocks post 3-session climb as bond yields, oil retreat

    U.S. stocks post 3-session climb as bond yields, oil retreat

    U.S. stocks booked a 3-session win streak Tuesday as oil prices and bond yields retreated. The Dow Jones Industrial Average
    DJIA,
    +0.40%
    climbed about 134 points, or 0.4%, ending near 33,739, according to preliminary FactSet data. That was the longest streak of straight wins for the blue-chip index in a month, and the best three days of gains since late August, according to Dow Jones Market Data. The S&P 500 index
    SPX,
    +0.52%
    advanced 0.5% and the Nasdaq Composite Index
    COMP,
    +0.58%
    gained 0.6%. It was the third session in a row of gains for all three indexes. The brighter backdrop for stock market came as oil prices
    CL00,
    -0.69%
    and bond yields
    TMUBMUSD10Y,
    4.663%
    retreated and after Raphael Bostic, head of the Atlanta Fed, said he didn’t think additional rate hikes were needed to bring inflation down to the central bank’s 2% annual target, but also that he still sees rates staying high for a “long time.”

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  • ‘Fear trade’: What Israel-Hamas war means for oil prices and financial markets

    ‘Fear trade’: What Israel-Hamas war means for oil prices and financial markets

    Oil traders on Sunday said crude prices were likely to remain supported in the near term, as investors assessed the fallout from the surprise attack by Hamas on Israel and focused on the role played by Iran and the potential impact on that country’s petroleum exports.

    The conflict may also hold market-moving consequences for talks aimed at normalizing relations between Saudi Arabia and Israel.

    “While in the short term there is no impact directly on supply, it’s obvious how things play out over the next 24 to 48 hours could change that,” Phil Flynn, an analyst at Price Futures Group in Chicago, told MarketWatch.

    Brent crude futures
    BRN00,
    +4.17%    ,
    the global benchmark, and West Texas Intermediate oil futures
    CL00,
    +4.35%

    CL.1,
    +4.35%
    jumped more than 3% when the market opened Sunday night. U.S. stock-index futures
    ES00,
    -0.66%
    traded lower, while traditional havens, including gold
    GC00,
    +0.98%
    and the U.S. dollar
    DXY
    rose.

    Movements in oil prices, meanwhile, will also serve as a gauge for broader market worries around the conflict, analysts said.

    See: Israeli stocks slump in first day of trade since Gaza attack

    Hamas, the Iran-backed, Palestinian militant group that controls the Gaza Strip, staged a sweeping attack on southern Israel early Saturday. News reports put Israeli deaths at more than 700. The Gaza Health Ministry said 413 people, including 78 children and 41 women, were killed in the territory as Israel retaliated, according to the Associated Press. Injuries in Israel and Gaza were both said to be around 2,000.

    Israeli troops on Sunday were engaged in fierce fighting in an effort to retake territory in southern Israel as Hamas launched further barrages of missiles. Israeli citizens and soldiers were captured and are being held hostage in Gaza, according to the Israeli military.

    Read: Israel declares war, approves ‘significant’ steps to retaliate after surprise attack by Hamas

    The Wall Street Journal reported that Iranian security officials helped Hamas plan the attack. U.S. officials said they haven’t seen evidence of Iran’s involvement, the report said.

    “Iran remains a very big wild card and we will be watching how strongly [Israeli] Prime Minister Netanyahu blames Tehran for facilitating these attacks by providing Hamas with weapons and logistical support,” said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a Sunday morning note.

    Iranian crude exports have risen in recent years, indicating the Biden administration has adopted a soft approach to sanctions enforcement, Croft said. Some analysts have put Iranian crude production at more than 3 million barrels a day and exports above 2 million barrels a day — the highest levels since the Trump administration pulled the U.S. out of the Iranian nuclear accord in 2018, according to the Wall Street Journal. Sales fell to around 400,000 barrels a day in 2020 as the U.S. reimposed sanctions.


    RBC Capital Markets

    Hedge-fund manager Pierre Andurand, one of the world’s best energy traders, said in a social-media post that a large price spike for oil isn’t likely in coming days, but emphasized the market focus on Iran.

    “Now, over the last six months we have seen a very large increase in Iranian supply due to weak enforcement of sanctions. As Iran is also behind Hamas’ attacks on Israel, there is a good probability that the U.S. administration will start enforcing those sanctions on Iranian oil exports more tightly,” he wrote. “That would further tighten the oil market. Also the probability that this will lead to direct conflict with Iran is not zero.”

    Meanwhile, the Wall Street Journal late Friday reported that Saudi Arabia had told the White House it would be willing to boost oil production next year if crude prices remained high, as part of an effort aimed at winning goodwill in Congress for a deal that would see the kingdom recognize Israel and in return get a defense agreement with the U.S.

    A Saudi production cut of 1 million barrels a day that was implemented in July and recently extended through the end of the year has been given much of the credit for a rally that took global benchmark Brent crude within a few dollars of the $100-a-barrel threshold before retreating this past week. The U.S. benchmark last week briefly topped $95 a barrel for the first time in 13 months.

    In a statement, Saudi Arabia’s foreign ministry called on both sides to halt the escalation and exercise restraint, but also recalled its “repeated warnings of the dangers of the explosion of the situation as a result of the continued occupation, the deprivation of the Palestinian people of their legitimate rights, and the repetition of systematic provocations against its sanctities.”

    With the Israeli government vowing an unprecedented response, “it is hard to envision how Saudi normalization talks can run on a parallel track to a ferocious military counteroffensive,” said RBC’s Croft.

    Beyond oil, much will depend on the potential for the conflict to widen.

    Stocks have stumbled, retreating from 2023 highs set in late July, as yields on U.S. Treasurys have jumped. The yield on the 30-year Treasury bond
    BX:TMUBMUSD30Y
    rose 23.2 basis points last week to end Friday at 4.941%, its highest since Sept. 20, 2007. The 10-year Treasury note yield
    BX:TMUBMUSD10Y
    topped 4.80% on Oct. 3, its highest since Aug. 8, 2007, and ended the week at 4.783%. Yields and debt prices move opposite each other.

    The U.S. bond market will be closed Monday for the Columbus Day and Indigenous People’s Day holiday, while U.S. stock markets will be open.

    The S&P 500 index
    SPX
    rose 0.5% last week, breaking a streak of four straight weekly declines, while the Dow Jones Industrial Average 
    DJIA
    fell 0.3% and the Nasdaq Composite
    COMP
    gained 1.6%.

    “I think there will be a negative reaction. However, I don’t see a meltdown,” Peter Cardillo, chief market economist at Spartan Capital Securities, told MarketWatch.

    Traditional haven plays, including gold, the dollar and U.S. Treasurys may see a strong move upward, with price gains for Treasurys pulling yields down.

    “Geopolitical crises in the Middle East have usually caused oil prices to rise and stock prices to fall,” said economist Ed Yardeni, president of Yardeni Research Inc., in a note. “More often than not, they’ve also tended to be buying opportunities in the stock market.”

    The broader market reaction will depend on whether the crisis turns out to be a short-term flare-up or “something much bigger, like a war between Israel and Iran,” he said. The latter is unlikely, but tensions between the two are likely to escalate.

    “The price of oil may be a good way to assess the likelihood of a broader conflict,” he said.

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  • U.S. stocks staged a surprising rally on Friday. But can the party last?

    U.S. stocks staged a surprising rally on Friday. But can the party last?

    U.S. stocks saw a surprising bounce on Friday, culminating in the S&P 500 index’s biggest intraday comeback since the March banking crisis, even though a monthly jobs report for September came in much higher than expected.

    So, are investors no longer worried about the Federal Reserve’s inflation fight or higher interest rates wrecking the U.S. economy?

    “Stocks initially sold off on the blockbuster jobs report which indicates the Fed may not be done,” said Gina Bolvin, president of Bolvin Wealth Management Group. “However, after digesting the strong labor market is still strong, stocks rallied. And why shouldn’t they? Will good news- finally – be good news?”

    Bolvin said part of the rally could be seasonal, with September typically being a rough months for stocks. There also has been increased optimism that the earnings recession for American corporations may be over, she said.

    Analysts are predicting corporate earnings growth rates of 5.9% for the fourth quarter for S&P500 companies, according to John Butters, senior earnings analyst at FactSet. Estimates are for the third-quarter of 2023 after the stock index’s fourth straight quarterly earnings decline on a year-over-year basis.

    At Friday’s session lows, the S&P 500 index
    SPX
    was down 0.9%, but it ended up posting a 1.2% advance, its largest intraday comeback since March 24, 2023, according to Dow Jones Market Data. The Dow Jones Industrial Average
    DJIA
    booked a 0.9% gain and the Nasdaq Composite Index
    COMP
    rose 1.6% higher.

    “The movement in stocks today is certainly encouraging given yields are up as well,” said Chris Fasciano, portfolio manager, Commonwealth Financial Network. “But we will need to see follow through next week.”

    The yield on 10-year Treasury
    BX:TMUBMUSD10Y
    note rose for five straight weeks in a row to 4.783% on Friday, while the 30-year yield
    BX:TMUBMUSD30Y
    rose to 4.941%, according to Dow Jones Market Data.

    Read: Why 5% bond yields could wreak havoc on the market

    While the U.S. stock-market will be open for business on Monday, the bond market will be closed for Columbus Day and Indigenous Peoples Day holiday, giving investors somewhat of a pause before a big week of economic data that could shape the Fed’s next decision on interest rates.

    “Ultimately, stocks and bonds will take their cues next week from the economic releases,” Fasciano told MarketWatch.

    Key items on the calendar for the week will be September inflation reports, with the producer-price index on Wednesday and the consumer-price index due Thursday. In between, Fed minutes of its policy meeting in September also are due to be released Wednesday.

    “That makes next week an important week for the future direction of both the bond and equity markets as the Fed will certainly be focused on those reports prior to their next meeting on Oct. 31-Nov. 1,” Fasciano said.

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  • U.S. stocks stage a surprising rally on Friday. But can the party last?

    U.S. stocks stage a surprising rally on Friday. But can the party last?

    U.S. stocks saw a surprising bounce on Friday, culminating in the S&P 500 index’s biggest intraday comeback since the March banking crisis, even though a monthly jobs report for September came in much higher than expected.

    So, are investors no longer worried about the Federal Reserve’s inflation fight or higher interest rates wrecking the U.S. economy?

    “Stocks initially sold off on the blockbuster jobs report which indicates the Fed may not be done,” said Gina Bolvin, president of Bolvin Wealth Management Group. “However, after digesting the strong labor market is still strong, stocks rallied. And why shouldn’t they? Will good news- finally – be good news?”

    Bolvin said part of the rally could be seasonal, with September typically being a rough months for stocks. There also has been increased optimism that the earnings recession for American corporations may be over, she said.

    Analysts are predicting corporate earnings growth rates of 5.9% for the fourth quarter for S&P500 companies, according to John Butters, senior earnings analyst at FactSet. Estimates are for the third-quarter of 2023 after the stock index’s fourth straight quarterly earnings decline on a year-over-year basis.

    At Friday’s session lows, the S&P 500 index
    SPX
    was down 0.9%, but it ended up posting a 1.2% advance, its largest intraday comeback since March 24, 2023, according to Dow Jones Market Data. The Dow Jones Industrial Average
    DJIA
    booked a 0.9% gain and the Nasdaq Composite Index
    COMP
    rose 1.6% higher.

    “The movement in stocks today is certainly encouraging given yields are up as well,” said Chris Fasciano, portfolio manager, Commonwealth Financial Network. “But we will need to see follow through next week.”

    The yield on 10-year Treasury
    BX:TMUBMUSD10Y
    note rose for five straight weeks in a row to 4.783% on Friday, while the 30-year yield
    BX:TMUBMUSD30Y
    rose to 4.941%, according to Dow Jones Market Data.

    Read: Why 5% bond yields could wreak havoc on the market

    While the U.S. stock-market will be open for business on Monday, the bond market will be closed for Columbus Day and Indigenous Peoples Day holiday, giving investors somewhat of a pause before a big week of economic data that could shape the Fed’s next decision on interest rates.

    “Ultimately, stocks and bonds will take their cues next week from the economic releases,” Fasciano told MarketWatch.

    Key items on the calendar for the week will be September inflation reports, with the producer-price index on Wednesday and the consumer-price index due Thursday. In between, Fed minutes of its policy meeting in September also are due to be released Wednesday.

    “That makes next week an important week for the future direction of both the bond and equity markets as the Fed will certainly be focused on those reports prior to their next meeting on Oct. 31-Nov. 1,” Fasciano said.

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  • S&P 500, Nasdaq notch best week in over a month as stocks jump after blowout jobs number

    S&P 500, Nasdaq notch best week in over a month as stocks jump after blowout jobs number

    U.S. stock indexes rallied on Friday to finish the volatile trading week in the green as Wall Street debated on whether a blockbuster surge in jobs created last month could make the Federal Reserve raise interest rates again this year, though wages growth are moderating. The S&P 500
    SPX,
    +1.18%
    advanced a modest 0.5% for the week with the benchmark index snapping its four-week losing streak, while the Dow Jones Industrial Average
    DJIA,
    +0.87%
    was down 0.3% and the Nasdaq Composite
    COMP,
    +1.60%
    jumped 1.6%, according to Dow Jones Market Data. On Friday, September jobs report showed the economy created 336,000 jobs last month, nearly twice the number expected, but the unemployment rate held steady at 3.8%, and hourly wages rose a mild 0.2% to mark their slowest annual growth rate in 18 months. A stronger-than-expected nonfarm payrolls report Friday triggered a renewed round of selling in the U.S. bond market, with the yield on the 10-year Treasury
    TMUBMUSD10Y,
    4.804%
    up 5 basis points to 5.077%, after touching an intraday high of 5.21% on Friday. The yield on the 30-year Treasury
    TMUBMUSD30Y,
    4.973%
    climbed 5 basis points to 4.941%, the highest since Sept. 20, 2007, according to Dow Jones Market Data.

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  • Why 5% bond yields could wreak havoc on the market

    Why 5% bond yields could wreak havoc on the market

    The yield on the 30-year Treasury bond briefly rose above 5% again on Friday, opening the door to the likelihood of a more sustainable rise above that mark and the risk that the benchmark 10-year yield follows — moves which could wreak havoc across financial markets.

    One big reason is that investors are likely to demand greater compensation for taking risk as yields hover around some of the highest levels of the past 16 years, asset managers said. Corporate credit spreads could keep widening in a sign of worsening economic conditions and higher overall risk. And with returns on government debt becoming a more favorable option for investments, the stock market may be vulnerable to repeated drubbings.

    Read: Treasury yields are climbing: ‘There’s never really been such an attractive opportunity for fixed-income investments’

    Stock investors nonetheless shook off Friday’s stunning official jobs report for September, which saw the U.S. add almost twice as many jobs as forecasters had expected. All three major stock indexes
    DJIA

    SPX

    COMP
    finished higher even though yields climbed on everything from the 1-month T-bill
    BX:TMUBMUSD01M
    to the 30-year bond
    BX:TMUBMUSD30Y.
    The yield on the long bond finished at 4.941% — the highest level since Sept. 20, 2007 — after rising past 5% during the New York morning. The rate on the 10-year note
    BX:TMUBMUSD10Y
    ended at 4.783%, the second-highest level of this year.

    Yields are returning to more normal-looking levels that prevailed before the 2007-2009 recession as the result of aggressive selloffs in government debt. More important than the absolute level of yields is the speed with which they have been heading to 5%. In the words of analyst Ajay Rajadhyaksha of Barclays earlier this week, there’s “no magic level” that will turn the current selloffs into a rally, and stocks have substantial room to reprice lower before bonds stabilize.

    “I think the market isn’t breaking yet, but a 5% 10-year yield is coming,” said Robert Daly, who manages $4.5 billion in assets as director of fixed income at Glenmede Investment Management in Philadelphia. “We’re already here on 30s and not that far away on 10s. Investors are trying to figure what level breaks the market, and I don’t think you can put your finger on the pulse as to what that level is.”

    Still, “a higher level of interest rates and yields is going to start having ramifications for broader markets at large,” leaving many investors hesitant to buy just about anything due to the volatility, Daly said via phone on Friday, after the release of September’s hot payrolls data.

    Friday’s data, which showed the U.S. creating 336,000 new jobs last month or almost double what economists had expected, is opening the door to a possible interest rate hike by the Federal Reserve on Nov. 1. The strong labor market means the Fed’s higher-for-longer mantra in rates is still in play and “the market is in a tenuous position to navigate all these things because of all the uncertainty,” Daly said.

    “Yields sustainably above 5% for a longer period of time will act as a weight on the market in terms of how you value risk compensation,” he said. “Investors are going to ask for more compensation to take risk and when you see liquidity evaporate more and more, that’s what’s going to turn the market over.”

    Friday’s price action was the second time this week that data related to the robust U.S. labor market has triggered a bonds selloff. On Tuesday, a snapback in U.S. job openings for August sent the 10- and 30-year yields to their highest closing levels since August-September of 2007.

    The next day, high-grade corporate-credit spreads widened for a seventh consecutive session. Daniel Krieter, a fixed-income strategist at BMO Capital Markets, wrote that “if rates continue to move higher or simply remain at these elevated levels for a significant period of time, it is going to have a pronounced effect on the creditworthiness of corporate borrowers, particularly in the high yield space.”

    In a note on Friday, Krieter’s colleagues, rates strategists Ian Lyngen and Ben Jeffery, wrote that “it’s not difficult to envision 10s maintain a range between 4.75% and 5.00%.”

    “The longer 10s hold this range, the more convinced the market will become that elevated yields are here to stay,” Lyngen and Jeffery said. “Admittedly, we’ve been surprised by the muted response in U.S. equities from the spike in yields and expect that’s due in part to the expectation for a swift reversal. In the event a correction fails to materialize, stocks will be overdue for a more meaningful reckoning.”

    The risk of “something breaking” will remain top of mind and “there is no shortage of risks facing equities and credit as rates continue to climb,” they added. “It’s not only the outright level of yields, but the length of time that borrowing costs stay elevated will also hold implications for risk asset valuations.”

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  • U.S. stocks end higher after blockbuster September jobs report as S&P 500 snaps 4-week losing streak

    U.S. stocks end higher after blockbuster September jobs report as S&P 500 snaps 4-week losing streak

    U.S. stocks closed higher Friday, with the S&P 500 eking out a modest weekly gain, as investors assessed a monthly jobs report that showed both a blockbuster surge in jobs created along with a slowdown in wage pressures.

    How stock indexes traded

    • The Dow Jones Industrial Average
      DJIA
      rose 288.01 points, or 0.9%, to close at 33,407.58.

    • The S&P 500
      SPX
      gained 50.31 points, or 1.2%, to finish at 4,308.50.

    • The Nasdaq Composite
      COMP
      climbed 211.51 points, or 1.6%, to end at 13,431.34.

    For the week, the Dow slipped 0.3% while the S&P 500 edged up 0.5% and the Nasdaq gained 1.6%. The Dow fell for a third straight week, while the S&P 500 snapped a four-week losing streak and the Nasdaq saw back-to-back weekly gains, according to Dow Jones Market Data.

    What drove markets

    U.S. stocks climbed Friday, after reversing course from their slide earlier in the session as investors parsed a U.S. employment report that was stronger than forecast.

    “Wages slowed down,” said José Torres, senior economist at Interactive Brokers, in a phone interview Friday. “That was a great development” as the Federal Reserve aims to bring down inflation through monetary tightening.

    Investors have worried that a hot labor market will keep wage growth elevated, adding to inflationary pressures that could see the Fed keep interest rates higher for longer or potentially hike its benchmark rate one more time this year.

    A report Friday from the Bureau of Labor Statistics showed the U.S. economy created 336,000 jobs in September, far surpassing economists’ expectations for 170,000 new jobs. Also, the report said job gains in August and July were revised higher.

    See: Jobs report shows big 336,000 gain in hiring in September. Labor market still hot.

    But other details from the report were slightly more favorable in terms of monetary policy concerns.

    For example, average hourly wages rose a mild 0.2% in September, bringing the 12-month rate of change through September to 4.2%, a slower pace than the prior month’s year-over-year rate of 4.3%.

    “Even though the headline number was 2.5 times what Wall Street had anticipated, the more important detail below the surface was that wage inflation actually cooled,” said Sam Stovall, chief investment strategist at CFRA, during a phone interview with MarketWatch.

    Renaissance Macro Research’s Neil Dutta said in a note that the jobs report was consistent with a soft landing for the economy and the Fed’s objective to lower the inflation rate back to 2%.

    Also see: Why another Fed rate hike this year ‘still a close call’ after jobs report, according to JPMorgan’s David Kelly

    “The strong labor market gives credence to the base case still being a soft landing,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management, in a phone interview Friday. But that soft-landing narrative is “somewhat fragile and data dependent,” he said.

    See: U.S. stocks stage a surprising rally on Friday. But can the party last?

    Investors will be watching for data scheduled to be released next week on September inflation from the consumer-price index and producer-price index.

    Meanwhile, economists from Goldman Sachs Group said in a note Friday that “the continued rebalancing of the labor market” is consistent with their expectation that the Fed is done raising rates this year, despite senior Fed officials projecting another hike in their latest batch of forecasts, released last month.

    Federal-funds-futures traders are expecting the Fed will keep its benchmark rate at the current range of 5.25% to 5.5% at its policy meetings in November and December, according to the CME FedWatch Tool.

    “I’m of the belief that the Fed will not hike again this year,” BMO’s Ma said. “I don’t think it needs to.”

    Meanwhile, the yield on the 10-year Treasury note
    BX:TMUBMUSD10Y
    climbed 6.8 basis points to 4.783%, rising for five straight weeks, according to Dow Jones Market Data.

    Rising Treasury yields, particularly on the long end of the yield curve, have been blamed for a selloff in stocks over the past couple months. But the S&P 500 is now up so far in October, with a small gain of 0.5%, according to FactSet data.

    Companies in focus

    Steve Goldstein contributed to this report.

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  • S&P 500 scores best day in 3 weeks as bond yields ease back

    S&P 500 scores best day in 3 weeks as bond yields ease back

    U.S. stocks finished higher on Wednesday as yields on long government bonds retreated from 16-year highs, helping lift the S&P 500 to its best day in three weeks. The Dow Jones Industrial Index
    SPX,
    +0.81%
    gained about 125 points, or 0.4%, ending near 33,128, according to preliminary FactSet data. The boost, however, failed to push the blue-chip index back into the green for the year, a day after its gains for 2023 were erased. The S&P 500 index
    SPX,
    +0.81%
    rose 0.8%, marking its biggest daily climb since September 14, according to FactSet data. The Nasdaq Composite Index
    COMP,
    +1.35%
    shot up 1.4%. U.S. bond yields have surged since late September when the Federal Reserve indicated that rates likely will stay higher for longer than initially anticipated as it works to keep inflation in check. The sharp bond-market repricing has made buyers reluctant to step in, sending yields higher and creating ripples in financial markets. The 10-year Treasury
    TMUBMUSD10Y,
    4.739%
    fell 6.6 basis points Wednesday to 4.735%, while the 30-year Treasury yield
    TMUBMUSD30Y,
    4.868%
    shed 6 basis points to 4.876%, after briefly topping 5% late Tuesday. Investors remain focused on political upheaval in Washington and the prospect of a November government shutdown. Friday also brings the monthly jobs report for September, which is expected to show a cooling labor market, but still a low 3.7% unemployment rate.

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  • What McCarthy ouster means for markets as investors fret over congressional ‘dysfunction’

    What McCarthy ouster means for markets as investors fret over congressional ‘dysfunction’

    Another round of political infighting that ended up spelling the end of Kevin McCarthy’s short tenure as House speaker on Tuesday wasn’t the primary driver of a selloff in stocks and bonds — but it didn’t help, analysts said.

    Continued dysfunction in Congress goes a long way toward explaining why the bond market has been ”out of sorts,” said Jamie Cox, managing partner for Harris Financial Group, in emailed comments.

    As the House began to vote on a motion by Republican Rep. Matt Gaetz of Florida to remove McCarthy from the speakership, stocks closed sharply lower. The Dow Jones Industrial Average
    DJIA
    fell more than 430 points, or 1.3%, to wipe out its 2023 gain, while the S&P 500
    SPX
    posted its lowest close since June 1.

    The drop came in response to a continued surge in Treasury yields that saw the rate on the 10-year note
    BX:TMUBMUSD10Y
    end above 4.80% at its highest since August 2007. Yields and debt prices move opposite each other.

    See: Rising Treasury yields are upsetting financial markets. Here’s why.

    McCarthy, a California Republican, lost the gavel as 216 members of the House voted in favor of ousting him while 210 supported him in a historic challenge.

    Read: Kevin McCarthy ousted as House speaker, falling after historic challenge by Matt Gaetz

    Analysts have pointed to a number of factors behind the continued climb in yields, including the Federal Reserve signaling last month that rates could stay high through 2024 and beyond.

    But market watchers said continued drama in Washington is doing nothing to soothe market volatility, with the showdown over McCarthy’s fate the result of a last-minute deal over the weekend that saw lawmakers temporarily avert a government shutdown. The latest turmoil comes just months after a debt-ceiling showdown that put the U.S. government on the brink of a first-ever default.

    “Investors are sick and tired of being jerked around with out of control spending, the inability to govern, and the constant dragging of markets to the edge of economic calamity with shutdowns and debt ceiling nonsense,” Cox wrote.

    McCarthy’s removal means a mid-November government shutdown, when stopgap funding runs out, is now an 80% probability, said Terry Haines, founder of Pangaea Policy, in a note.

    “[I]t’s not a one-off shutdown markets should be concerned about, but increased volatility for at least 3 months where markets won’t know final decisions on U.S. government annual spending, particularly in government-dependent sectors including defense, semiconductors, and healthcare,” Haines said.

    Tom Essaye, founder of Sevens Report Research, warned that the ”more dysfunctional” Congress appears, ”the higher yields go and the more stocks drop.”

    ”So, while congressional dysfunction isn’t the main reason yields are volatile, it is a contributor and the sooner Washington removes itself from the market dialogue, the better,” he said in a Tuesday morning note.

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  • Japanese yen sees wild swing amid intervention fears after falling to nearly 1-year low versus dollar

    Japanese yen sees wild swing amid intervention fears after falling to nearly 1-year low versus dollar

    The Japanese yen roared back violently against the dollar Tuesday amid fears of intervention by Tokyo after trading at its weakest in nearly a year after a round of strong U.S. employment data.

    The U.S. dollar fetched 148.92 Japanese yen
    USDJPY,
    -0.42%    ,
    down 0.6%, after trading as low as 147.415 yen in a sharp tumble from a session high of 150.18 yen. The dollar hadn’t traded above the 150-yen level since Oct. 21, 2022, according to FactSet data.

    Japanese authorities in the fall of 2022 intervened in the market, selling dollars and buying yen as the Japanese currency slumped. Currency traders had been on the lookout for renewed intervention as the yen extended its recent weakness. Japan’s Ministry of Finance has issued several verbal warnings over recent weeks, but they have failed to arrest the yen’s fall.

    Finance Minister Shunichi Suzuki earlier Tuesday had warned that “all measures are on the table with a high sense of urgency,” according to Nikkei.

    But FX analysts were skeptical the yen’s bounceback was due to intervention.

    “Talk of intervention but I am skeptical.  It seems like the market is doing it to itself with orders to sell dollar above JPY150.  BOJ intervened three times last year, none was during US time zone,” said Marc Chandler, managing director at Bannockburn Global Forex, in a note to clients.

    The dollar had initially extended its rally versus the yen and other major currencies after data showed U.S. job openings jumped unexpectedly to 9.6 million in September, up from a revised 8.9 million in August. Analysts surveyed by The Wall Street Journal had expected a reading of 8.8 million.

    Continued strength in the labor market added to a rise in Treasury yields
    BX:TMUBMUSD10Y,
    which in turn boosted the dollar. The ICE U.S. Dollar Index
    DXY,
    a measure of the currency against a basket of six major rivals, remained up 0.1% at 107.06, after trading at its highest since November.

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