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Tag: U.S. 10 Year Treasury Note

  • U.S. stocks fall on last trading day of 2022, booking monthly losses and worst year since 2008

    U.S. stocks fall on last trading day of 2022, booking monthly losses and worst year since 2008

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    U.S. stocks ended lower Friday, booking their worst annual losses since 2008, as tax-loss harvesting along with anxieties about the outlook for corporate profits and the U.S. consumer took their toll.

    How stock indexes traded
    • The Dow Jones Industrial Average
      DJIA,
      -0.22%
      slipped 73.55 points, or 0.2%, to 33,147.25.

    • The S&P 500
      SPX,
      -0.25%
      shed 9.78 points, or 0.3%, to 3,839.50.

    • The Nasdaq Composite dipped 11.61 points, or 0.1%, to 10,466.48.

    For the week, the Dow fell 0.2%, the S&P 500 slipped 0.1% and the Nasdaq slid 0.3%. The S&P 500 dropped for a fourth straight week, its longest losing streak since May, according to Dow Jones Market Data.

    All three major benchmarks suffered their worst year since 2008 based on percentage declines. The Dow dropped 8.8% in 2022, while the S&P 500 tumbled 19.4% and the technology-heavy Nasdaq plunged 33.1%.

    What drove markets

    U.S. stocks fell Friday, closing out the last trading session of 2022 with weekly and monthly losses.

    Stocks and bonds have been crushed this year as the Federal Reserve raised its benchmark interest rate more aggressively than many had expected as it sought to crush the worst inflation in four decades. The S&P 500 ended 2022 with a loss of 19.4%, its worst annual performance since 2008 as the index snapped a three-year win streak, according to Dow Jones Market Data.

    “Investors have been on edge,” said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management, in a phone interview Friday. “It seems as though the ability to drive down prices is probably a bit easier given just how crummy the year’s been.”

    Stock indexes have slumped in recent weeks as hopes for a Fed policy pivot faded after the central bank in December signaled that it would likely wait until 2024 to cut interest rates.

    On the final day of the trading year, markets were also being hit by selling to lock in losses that can be written off of tax bills, a practice known as tax-loss harvesting, according to Kim Forrest, chief investment officer at Bokeh Capital Partners.

    An uncertain outlook for 2023 was also taking its toll, as investors fretted about the strength of corporate profits, the economy and the U.S. consumer with fourth-quarter earnings season looming early next year, Forrest said.

    “I think the Fed, and then earnings in the middle of January — those are going to set the tone for the next six months. Until then, it’s anybody’s guess,” she added.

    The U.S. central bank has raised its benchmark rate by more than four percentage points since the beginning of the year, driving borrowing costs to their highest levels since 2007.

    The timing of the Fed’s first interest rate cut will likely have a major impact on markets, according to Forrest, but the outlook remains uncertain, even as the Fed has tried to signal that it plans to keep rates higher for longer.

    On the economic data front, the Chicago PMI for December, the last major data release of the year, came in stronger than expected, climbing to 44.9 from 37.2 a month prior. Readings below 50 indicate contraction territory.

    Next year, “we’re more likely to shift towards fears around economic growth as opposed to inflation,” said Heppenstall. “I think the decline in growth will eventually lead to a more meaningful decline in inflation.”

    Read: Stock-market investors face 3 recession scenarios in 2023

    Eric Sterner, CIO of Apollon Wealth Management, said in a phone interview Friday that he’s expecting the U.S. could fall into a recession next year and that the stock market could see a new bottom as companies potentially revise their earnings lower. “I think earnings expectations for 2023 are still too high,” he said.

    The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite booked modest weekly declines, adding to their December losses. For the month, the Dow fell 4.2%, while the S&P 500 dropped 5.9% and the Nasdaq sank 8.7%, FactSet data show.

    Read: Value stocks trounce growth equities in 2022 by historically wide margin

    As for bonds, the U.S. Treasury market was set to record its worst year since at least the 1970s.

    The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.879%
    has jumped 2.330 percentage points this year to 3.826%, its largest annual gain on record based on data going back to 1977, according to Dow Jones Market Data.

    Two-year Treasury yields
    TMUBMUSD02Y,
    4.423%
    soared 3.669 percentage points in 2022 to 4.399%, while the 30-year yield
    TMUBMUSD30Y,
    3.971%
    jumped 2.046 percentage points to end the year at 3.934%. That marked the largest calendar-year increases ever for each based on data going back to 1973, according to Dow Jones Market Data.

    Outside the U.S., European stocks capped off their biggest percentage drop for a calendar year since 2018, with the Stoxx Europe 600
    SXXP,
    -1.27%    ,
    an index of euro-denominated shares, falling 12.9%, according to Dow Jones Market Data.

    Read: Slumping U.S. stock market lags these international ETFs as 2022 comes to an end

    Companies in focus

    —Steve Goldstein contributed to this article.

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  • $3,000 gold and more outrageous market predictions investors shouldn’t brush aside.

    $3,000 gold and more outrageous market predictions investors shouldn’t brush aside.

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    Monday served as another smackdown for investors who are banking on a Goldilocks economy and a less aggressive Fed.

    Some are now not ruling out a Grinch-like turn from the central bank — a 0.75% hike next week instead of the 0.50% markets have been pinning hopes on — following strong data on services, jobs and wages.

    It all goes along with the theme of 2022 — expect the unexpected. The relief of moving out of a crippling pandemic was quickly replaced by the biggest war on Europe’s shores in decades, that sparked worldwide inflation surges.

    What comes next is anyone’s guess and that brings us to our call of the day via Saxo Bank’s annual “Outrageous Predictions” for 2023.

    While some of these will sound crazy, note that the Saxo team, led by Chief Investment Officer Steen Jakobsen, have nailed a few wild prophecies in the past decade. Those include: a Brexit prediction in 2015, a 25% drop for the S&P 500 from its 2007 high in 2008, a tripling of Bitcoin’s value forecast in 2017.

    The focus for 2023’s prediction is that “a return to the disinflationary prepandemic dynamic is impossible because we have entered into a global war economy, with every major power across the world now scrambling to shore up their national security on all fronts; whether in an actual military sense, or due to profound supply-chain, energy and even financial insecurities that have been laid bare by the pandemic experience and Russia’s invasion of Ukraine,” says Jakobsen.

    As for those predictions, here we go:

    • Gold crosses $2,075 then rockets to $3,000 on unstoppable inflation. “Fed policy tightening and quantitative tightening drives a new snag in U.S. treasury markets that forces new sneaky ‘measures’ to contain Treasury market volatility that really amounts to new de facto quantitative easing,” says Saxo. And China’s end of zero-COVID drives up demand, commodity prices and inflation.

    • Widespread price controls to cap official inflation due to war economy mentality. “In 2023, expect broadening price and even wage controls, maybe even something like a new National Board for Prices and Incomes being established in the U.K. and the U.S.,” said Saxo. Market fallout? Fuel for gold’s
      GC00,
      +0.19%
      climb.

    • There’s a new reserve asset in town. Non U.S.-allied countries move away from the U.S. and IMF to create an “international clearing union (ICU) and a new reserve asset, called the Bancor (currency code KEY)” that borrows from economist John Maynard Keynes idea of resisting U.S. power over the international monetary system. Nonaligned central banks slash U.S. dollar reserves, Treasury yields soar and the dollar
      DXY,
      +0.09%
      drops 25% against a basket of currencies that trade with Bancor.

    • Japan pegs USDJPY to 200. Pressure intensifies on the already weak yen
      USDJPY,
      +0.04%
      into 2023 as currency intervention fails and inflation soars. The government resets the financial system, erasing all debt, recapitalizing banks, as trillions of yen return to Japan shores. But the yen still weakens by year-end.

    • A $10 trillion-dollar Manhattan project. A team of major tech leaders form a mega research-and-development effort for energy infrastructure and ground-breaking technologies — the Third Stone. Companies tied to the project soar in an overall weak environment for investing.

    • Tax haven ban kills private equity. The OECD launches a full ban on the biggest tax havens in the world in 2023 and in the U.S., carried interest tax as capital gains is shifted to ordinary income. It’s a body blow for private equity and venture capital — the valuation of publicly listed private-equity firms fall 50%.

    The rest of their predictions are here, such as the formation of an EU Armed Forces in 2023 and an “UnBrexit” referendum.

    Read: Why Monday’s stock-market rout should be a wake up call for investors

    The markets

    MarketWatch

    Stocks
    DJIA,
    -0.96%
     
    SPX,
    -1.40%
     
    COMP,
    -1.77%
    are drifting into the red, with Treasury yields
    TMUBMUSD10Y,
    3.571%
     
    TMUBMUSD02Y,
    4.395%
    steady, the dollar
    DXY,
    +0.09%
    lower and oil
    CL.1,
    -3.43%
     
    BRN00,
    -3.73%
    also down.

    For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

    The buzz

    BioVie stock
    BIVI,
    -18.43%
    is climbing after positive results from the clinical-stage biopharmaceutical company on a drug for Parkinson’s and Alzheimer’s.

    NRG Energy
    NRG,
    -15.79%
    agreed to buy Vivint Smart Home
    VVNT,
    +32.31%
    in a $5.2 billion deal. Vivint shares are soaring.

    MEI Pharma
    MEIP,
    -33.52%
    shares are tumbing after drugmaker said it would stop developing cancer treatment zandelisib outside of Japan and announces job cuts. Herbalife shares
    HLF,
    -18.85%
    are down 10% after an offering of convertible notes 

    Powell Industries
    POWL,
    +19.11%
    stock is up 9% after the electrical equipment maker’s well-received results and new orders. Within software Sumo Logic
    SUMO,
    +11.65%
    and GitLab shares
    GTLB,
    +5.71%
    are surging on upbeat results and forecasts.

    Layoffs extending beyond tech? PepsiCo 
    PEP,
    -0.86%
    is reportedly cutting hundreds of workers at its North American headquarters.

    Home builder Toll Brothers
    TOL,
    -1.56%
    will report results after the close.

    The October trade deficit jumped 5.4% to $78,2 billion.

    The U.S. and EU are reportedly considering fresh steel and aluminum tariffs on China to fight carbon emissions.

    Best of the web

    “Nothing to be glad about.” An empty, lonely and cold formerly occupied Ukraine city.

    Morocco’s World Cup team leans on its secret weapon of parents in the stands.

    Why human composting could be the next big thing.

    The chart

    Headed into the holidays, consumers are using savings and credit, says a team of Jefferies analysts led by Corey Tarlowe. “The savings rate continues to trend lower and credit card balances are growing +15% Y/Y. We believe these trends indicate that the consumer is stretched.”

    Against this backdrop, they like Costco
    COST,
    -1.34%    ,
    Dollar General
    DG,
    -1.52%    ,
    Target
    TGT,
    +0.13%
    and Walmart
    WMT,
    -0.98%    .


    FactSet/Jefferies

    The tickers

    These were the top-searched tickers on MarketWatch at 6 a.m.:

    Ticker

    		 Security name
    TSLA,
    -2.00%         		Tesla
    GME,
    -5.32%         		GameStop
    AMC,
    -9.00%         		AMC Entertainment
    NIO,
    +2.37%         		NIO
    BBBY,
    -8.86%         		Bed Bath & Beyond
    AAPL,
    -1.83%         		Apple
    APE,
    -5.40%         		AMC Entertainment Holdings preferred shares
    COSM,
    -17.49%         		Cosmos
    AMZN,
    -2.26%         		Amazon.com
    MULN,
    -3.08%         		Mullen Automotive
    Random reads

    Tributes pour after “Cheers” star Kirstie Alley dies at 71.

    Happy 190th birthday to the world’s oldest tortoise.

    A green Grinchy dog for Christmas? Not everyone’s heart grew three sizes.

    Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

    Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton

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  • S&P 500, Nasdaq post worst day in month after strong data fuels worry about Fed rate hikes

    S&P 500, Nasdaq post worst day in month after strong data fuels worry about Fed rate hikes

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    The S&P 500 and Nasdaq Composite indexes recorded their worst day in almost a month on Monday, after a hotter-than-expected U.S. services-sector reading fueled concerns that the Federal Reserve may need to be even more aggressive in its inflation battle.

    How stocks traded
    • The Dow Jones Industrial Average
      DJIA,
      -0.26%
      finished down 482.78 points, or 1.4%, at 33,947.10.

    • The S&P 500
      SPX,
      -1.79%
      ended 72.86 points lower, or 1.8%, at 3,998.84.

    • The Nasdaq Composite
      COMP,
      -11.01%
      closed down 221.56 points, or 1.9%, at 11,239.94.

    • Those were the largest declines for the S&P 500 and Nasdaq Composite since Nov. 9, according to Dow Jones Market Data.

    Stocks finished mixed on Friday, although they clinched gains last week, following a robust November jobs report, which stoked fears that inflation might not be so easily defeated.

    What drove markets

    Strong wage growth numbers released Friday were followed up on Monday by a robust reading for the U.S. services sector — both of which helped to stoke fears that the Fed’s interest-rate hikes, along with the central bank’s modest balance-sheet unwind, haven’t had much of an impact on the tight labor market.

    The ISM barometer of U.S. business conditions in the service sector came in stronger than expected, rising to 56.5% in November, a healthy showing that signals the U.S. economy is still expanding at a steady pace.

    “If nothing else, the ISM services report is being interpreted as very strong, and thus the economy is overheating and that means more Fed tightening,” said Will Compernolle, a senior economist at FHN Financial in New York. “Consumer resilience has proven to be more intense than I would have expected. In the two most interest-rate sensitive sectors — housing and autos — tightening has channeled into markets in meaningful ways.”

    But there has been so much pent-up demand, that higher interest rates haven’t been cooling overall spending as much as the Fed would like because companies are still having to fill a backlog of orders, he said via phone.

    In other economic data, the final November S&P Global U.S. services PMI edged up to 46.2 from 46.1, but remained in contractionary territory.

    November jobs data released on Friday showed average hourly wages grew over the past year by more than 5% as of November, beating economists’ expectations and stoking concerns that robust wage growth would continue to fuel inflation, market strategists said.

    Worries about a more-aggressive Fed also helped to drive Treasury yields higher, adding to the pressure on stocks. The yield on the 10-year note rose 9.6 basis points to 3.6% on Monday. Treasury yields move inversely to prices, and yields had fallen sharply over the past month, driven by shifting expectations about the pace of Fed rate hikes.

    Monday’s ISM services figure “surprised to the upside, suggesting that the economy is still running above its long-run sustainable path and that the Fed is going to have to slow the economy more than expected in 2023,” Bill Adams, the Dallas-based chief economist for Comerica Inc. CMA, said via phone.

    In other markets news, signs that China’s government is easing its COVID restrictions helped Hong Kong’s Hang Seng Index
    HSI,
    +4.51%
    finish with a 4.5% gain.

    See also: Chinese ADRs and casino operators rally on signs of easing COVID

    Meanwhile, oil futures ended lower on Monday, a day after Sunday’s decision by OPEC and its allies to keep production quotas unchanged.

    Falling equity prices helped drive the CBOE Volatility Index
    VIX,
    +8.87%    ,
    also known as the VIX, back above 20 on Monday. The volatility gauge had fallen sharply in recent weeks as stocks rallied, potentially signaling complacency that could ultimately hurt stocks, said Jonathan Krinsky, chief market technician at BTIG, in a note to clients.

    Companies in focus

    ––Jamie Chisholm contributed reporting to this article.

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  • Dow down by more than 500 points as Fed officials point to more rate hikes, China protests rattle markets

    Dow down by more than 500 points as Fed officials point to more rate hikes, China protests rattle markets

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    U.S. stocks tumbled on Monday as protests in China raised the risks to global growth and Federal Reserve policy makers said more interest-rate increases are needed to control inflation.

    How stocks are trading
    • The Dow Jones Industrial Average was down 523 points, or 1.5%, at 33,824, near its session low.

    • The S&P 500
      SPX,
      -1.65%
      retreated 68 points, or 1.7%, to 3,958.

    • The Nasdaq Composite shed 195 points, or 1.7%, dropping to 11,031.

    U.S. stocks had notched weekly gains last week for the second time in three weeks. The Dow rose 1.8%, the S&P 500 advanced 1.5% and the Nasdaq gained 0.7%.

    What’s driving markets

    Wall Street started the week in a downbeat mood as traders absorbed the impact of unrest in China and assessed interest-rate commentary by a pair of Fed officials on Monday.

    St. Louis Fed President James Bullard told MarketWatch that he favors more aggressive interest-rate hikes to contain inflation, and that the central bank will likely need to keep interest rates above 5% into 2024. Meanwhile, his colleague John Williams, president of the New York Fed, said that U.S. unemployment could climb to as high as 5% next year, versus October’s rate of 3.7%, in response to the central bank’s series of rate hikes.

    Overseas, Hong Kong’s Hang Seng Index
    HSI,
    -1.57%
    closed down by 1.6% and most equity indexes across Asia also fell, with the exception of India’s, on concerns about unrest in China. Those concerns also spilled over into commodity markets, where West Texas Intermediate crude for January delivery
    CLF23,
    +0.93%
     briefly fell to less than $74 per barrel before recovering and settling at $77.24 a barrel on the New York Mercantile Exchange. Meanwhile, copper prices HG00 were off 0.9% at $3.594 per pound.

    “What people are worried about is the potential for protests in China to spread and whether the population is reaching its breaking point,” said Derek Tang, an economist at Monetary Policy Analytics in Washington. “At the same time, Fed speak is ramping up and the message is there’s more hikes to come. So investors aren’t finding relief.”

    Signs that economic activity in China will continue to be disrupted by the protests or by additional anti-COVID measures will likely continue to weigh on commodity prices, analysts said. Meanwhile, concerns about global growth helped to support government bond markets earlier on Monday, when the yield on the 10-year note
    TMUBMUSD10Y,
    3.693%
    briefly traded at its lowest level since October.

    The unprecedented waves of protest in China “have caused ripples of unease across financial markets, as worries mount about repercussions for the world’s second-largest economy,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. “As demonstrations spread across the country from Beijing to Xinjiang and Shanghai, reflecting rising anger about the zero-Covid policy, a sustained recovery in demand across the vast country appears even further away.”

    But the news wasn’t all bad: Reports of strong online Black Friday sales helped boost shares of Amazon.com Inc.
    AMZN,
    +0.29%    ,
    which were up 0.6%.

    Investors can expect more information about the health of the U.S. economy in what’s shaping up to be a busy week for U.S. economic data: Later this week, investors will receive the ADP employment report followed by the November jobs report. Revised data on third-quarter gross domestic product is due on Wednesday, along with the Fed’s Beige Book report. Federal Reserve chair Jerome Powell is set to speak publicly on Wednesday, and a closely watched gauge of inflation is due on Thursday.

    Read: ‘We see major stock markets plunging 25% from levels somewhat above today’s,’ Deutsche Bank says

    Single-stock movers

    — Jamie Chisholm contributed to this article.

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  • Is the market bottom in? 5 reasons U.S. stocks could continue to suffer heading into next year.

    Is the market bottom in? 5 reasons U.S. stocks could continue to suffer heading into next year.

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    With the S&P 500 holding above 4,000 and the CBOE Volatility Gauge, known as the “Vix” or Wall Street’s “fear gauge,”
    VIX,
    +0.74%
    having fallen to one of its lowest levels of the year, many investors across Wall Street are beginning to wonder if the lows are finally in for stocks — especially now that the Federal Reserve has signaled a slower pace of interest rate hikes going forward.

    But the fact remains: inflation is holding near four-decade highs and most economists expect the U.S. economy to slide into a recession next year.

    The last six weeks have been kind to U.S. stocks. The S&P 500
    SPX,
    -0.03%
    continued to climb after a stellar October for stocks, and as a result has been trading above its 200-day moving average for a couple of weeks now.

    What’s more, after having led the market higher since mid-October, the Dow Jones Industrial Average
    DJIA,
    +0.23%
    is on the cusp of exiting bear-market territory, having risen more than 19% from its late-September low.

    Some analysts are worried that these recent successes could mean that U.S. stocks have become overbought. Independent analyst Helen Meisler made her case for this in a recent piece she wrote for CMC Markets.

    “My estimation is that the market is slightly overbought on an intermediate-term basis, but could become fully overbought in early December,” Meisler said. And she’s hardly alone in anticipating that stocks might soon experience another pullback.

    Morgan Stanley’s Mike Wilson, who has become one of Wall Street’s most closely followed analysts after anticipating this year’s bruising selloff, said earlier this week that he expects the S&P 500 will bottom around 3,000 during the first quarter of next year, resulting in a “terrific” buying opportunity.

    With so much uncertainty plaguing the outlook for stocks, corporate profits, the economy and inflation, among other factors, here are a few things investors might want to parse before deciding whether an investable low in stocks has truly arrived, or not.

    Dimming expectations around corporate profits could hurt stocks

    Earlier this month, equity strategists at Goldman Sachs Group
    GS,
    +0.68%
    and Bank of America Merrill Lynch
    BAC,
    +0.24%
    warned that they expect corporate earnings growth to stagnate next year. While analysts and corporations have cut their profit guidance, many on Wall Street expect more cuts to come heading into next year, as Wilson and others have said.

    This could put more downward pressure on stocks as corporate earnings growth has slowed, but still limped along, so far this year, thanks in large part to surging profits for U.S. oil and gas companies.

    History suggests that stocks won’t bottom until the Fed cuts rates

    One notable chart produced by analysts at Bank of America has made the rounds several times this year. It shows how over the past 70 years, U.S. stocks have tended not to bottom until after the Fed has cut interest-rates.

    Typically, stocks don’t begin the long slog higher until after the Fed has squeezed in at least a few cuts, although during March 2020, the nadir of the COVID-19-inspired selloff coincided almost exactly with the Fed’s decision to slash rates back to zero and unleash massive monetary stimulus.


    BANK OF AMERICA

    Then again, history is no guarantee of future performance, as market strategists are fond of saying.

    Fed’s benchmark policy rate could rise further than investors expect

    Fed funds futures, which traders use to speculate on the path forward for the Fed funds rate, presently see interest-rates peaking in the middle of next year, with the first cut most likely arriving in the fourth quarter, according to the CME’s FedWatch tool.

    However, with inflation still well above the Fed’s 2% target, it’s possible — perhaps even likely — that the central bank will need to keep interest rates higher for longer, inflicting more pain on stocks, said Mohannad Aama, a portfolio manager at Beam Capital.

    “Everyone is expecting a cut in the second half of 2023,” Aama told MarketWatch. “However, ‘higher for longer’ will prove to be for the entire duration of 2023, which most folks haven’t modeled,” he said.

    Higher interest rates for longer would be particularly bad news for growth stocks and the Nasdaq Composite
    COMP,
    -0.52%    ,
    which outperformed during the era of rock-bottom interest rates, market strategists say.

    But if inflation doesn’t swiftly recede, the Fed might have little choice but to persevere, as several senior Fed officials — including Chairman Jerome Powell — have said in their public comments. While markets celebrated modestly softer-than-expected readings on October inflation, Aama believes wage growth hasn’t peaked yet, which could keep pressure on prices, among other factors.

    Earlier this month, a team of analysts at Bank of America shared a model with clients which showed that inflation might not substantially dissipate until 2024. According to the most recent Fed “dot plot” of interest rate forecasts, senior Fed policy makers expect rates will peak next year.

    But the Fed’s own forecasts rarely pan out. This has been especially true in recent years. For example, the Fed backed off the last time it tried to materially raise interest rates after President Donald Trump lashed out at the central bank and ructions rattled the repo market. Ultimately, the advent of the COVID-19 pandemic inspired the central bank to slash rates back to the zero bound.

    Bond market is still telegraphing a recession ahead

    Hopes that the U.S. economy might avoid a punishing recession have certainly helped to bolster stocks, market analysts said, but in the bond market, an increasingly inverted Treasury yield curve is sending the exact opposite message.

    The yield on the 2-year Treasury note
    TMUBMUSD02Y,
    4.479%
    on Friday was trading more than 75 basis points higher than the 10-year note
    TMUBMUSD10Y,
    3.687%
    at around its most inverted level in more than 40 years.

    At this point, both the 2s/10s yield curve and 3m/10s yield curve have become substantially inverted. Inverted yield curves are seen as reliable recession indicators, with historical data showing that a 3m/10s inversion is even more effective at predicting looming downturns than the 2s/10s inversion.

    With markets sending mixed messages, market strategists said investors should pay more attention to the bond market.

    “It’s not a perfect indicator, but when stock and bond markets differ I tend to believe the bond market,” said Steve Sosnick, chief strategist at Interactive Brokers.

    Ukraine remains a wild card

    To be sure, it’s possible that a swift resolution to the war in Ukraine could send global stocks higher, as the conflict has disrupted the flow of critical commodities including crude oil, natural gas and wheat, helping to stoke inflation around the world.

    But some have also imagined how continued success on the part of the Ukrainians could provoke an escalation by Russia, which could be very, very bad for markets, not to mention humanity. As Clocktower Group’s Marko Papic said: “I actually think the biggest risk to the market is that Ukraine continues to illustrate to the world just how capable it is. Further successes by Ukraine could then prompt a reaction by Russia that is non-conventional. This would be the biggest risk [for U.S. stocks],” Papic said in emailed comments to MarketWatch.

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  • U.S. stock futures, bonds rally as wholesale price growth slows

    U.S. stock futures, bonds rally as wholesale price growth slows

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    U.S. stock futures rallied Tuesday morning after the producer price index for October came in lower than expected. The PPI index slowed to 8% from 8.4% in the 12 months through October, while core price growth slowed to 5.4% from 5.6%. Futures for the S&P 500 rose 78 points, or 2%, to 4,045, while futures for the Nasdaq 100 rose 366 points, or 3.1% to 12,102 after stock futures traded modestly higher before the data. Futures for the Dow Jones Industrial Average rose 405 points, or 1.2% to 33,967. Treasurys also rallied, with Treasury yields falling 9.4 basis points to 3.778%. Treasury yields move inversely to prices. The PPI data, which gauge prices paid by wholesale producers of goods, appeared to mirror a slowdown in consumer-price inflation exhibited by the October CPI released on Thursday. The October CPI report helped to cement expectations that the Federal Reserve will opt for a smaller interest-rate hike in December after four consecutive 75 basis point hikes.

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  • Is the stock market open? Veterans Day is a regular day for U.S. stocks, but the bond market is closed.

    Is the stock market open? Veterans Day is a regular day for U.S. stocks, but the bond market is closed.

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    The stock market remains open Friday, Nov. 11, the Veterans Day holiday in the U.S., even through it counts as a holiday for the $53 trillion American bond market.

    That means a full day of trading for stocks, which appear poised to book a robust week of gains, despite continued fears of a potential U.S. economic recession as the Federal Reserve works to tame stubbornly high costs of living.

    Signs of a potential cooling off on the inflation front led the Dow Jones Industrial Average
    DJIA,
    +3.70%
    to advance 1,200 points on Thursday, with it, the S&P 500 index
    SPX,
    +5.54%
    and Nasdaq Composite Index
    COMP,
    +31.35%
    all booking their best daily gains since 2020.

    Don’t miss: Veterans Day: Are banks open? Does USPS deliver mail?

    While Friday marks the start of a three-day weekend for the bond market, Treasury yields already have climbed dramatically this year with the Fed’s sharp rate hikes. The central bank aims to temper demand for goods and services by making borrowing costs more restrictive.

    Consumers may feel certain effects of inflation in their everyday lives, like when they go to the grocery store. But it can also impact our savings and investments. Here’s what to know.

    The benchmark 10-year Treasury rate
    TMUBMUSD10Y,
    3.819%
    fell to about 3.8% on Thursday, but was up from a 1.3% low last December. Bond yields move in the opposite direction of prices.

    The fresh rally on Wall Street followed the consumer-price index reading for October showing a 7.7% annual rate, down from a 9.1% high in June. The Dow remains down more than 8% from its January peak, the S&P 500 is 17.5% lower and the Nasdaq is 31% below its last record close, according to Dow Jones Market Data.

    Veterans Day was born out of the wreckage of World War I, with Nov. 11 recognized as a legal holiday in the U.S. in 1938, two decades after an armistice between the Allied nations and Germany went into effect at the 11th hour of the 11th day of the 11th month.

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  • What NASA knows about soft landings that the Federal Reserve doesn’t

    What NASA knows about soft landings that the Federal Reserve doesn’t

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    The Federal Reserve still has a chance to meet both of its main goals — strong economic growth and stable prices — but time is running out to achieve a soft landing.

    The problem is that Fed officials are fixated on raising interest rates
    FF00,
    +0.00%
    several more times, including another supersize increase at their meeting Tuesday and Wednesday. They don’t seem to notice that inflation is already retreating significantly, while growth is dangerously close to stalling out.

    They have a blind spot because they are looking at the past.

    Greg Robb: Another jumbo Fed rate hike is expected this week — and then life gets difficult for Chairman Powell

    Fed officials ought to reach out to another government agency that has had remarkable success in achieving soft landings: The National Aeronautics and Space Administration.

    NASA’s scientists know something the Fed has forgotten: It takes a long time to send and receive messages from space, so they need to account for those delays when sending instructions to their spacecraft so they can land safely on Mars, or orbit Saturn or the moons of Jupiter.

    Compounding errors

    It’s the same way with the economy. The signals that the Fed receives from the economy are often delayed, sometimes by months. Unfortunately, one of the main signals the Fed is relying upon right now to decide how much to raise interest rates is delayed by a year or more.

    I’m talking about inflation in the price of putting a roof over our heads. Shelter prices are now the leading contributor to increases in the consumer price index (CPI) and the personal consumption expenditure (PCE) price index. But because of the way the CPI for shelter is constructed — for very good reasons — the inflation reported today reflects conditions as they were 12 to 18 months ago.

    The error is compounded because shelter prices are by far the largest component of the CPI, at more than 30%.

    The Fed is disappointed that inflation hasn’t declined more since it began raising interest rates in March, but how could it when the signals about shelter prices were sent last summer and fall, long before the housing market began to cool in response to higher interest rates
    TMUBMUSD10Y,
    4.049%
    and the reductions in the Fed’s holdings of mortgage-backed securities?

    According to real-time data, shelter prices are no longer rising at a near-10% annual rate as the CPI and PCE price index claim. Growth in rents and house prices has slowed since the first rate hikes in March. House prices are actually falling in most regions of the country, and private-sector measures of rents show that landlords are now dropping rents in many cities.

    Just like a radio signal from Jupiter, it takes time for that message to be received by the CPI. It will be received and incorporated into the CPI eventually, but by then it may be too late for the Fed to react. The Fed might crash the spacecraft because it mistakenly believes the messages it gets are in real time.

    Growth is slowing

    The Fed’s blind spot puts the economy in peril. Recent data show that growth is naturally slowing from the breakneck pace following the pandemic shutdowns but also from the Fed’s relentless squeeze on financial conditions.

    It’s very hard to argue that the economy is still overheating. Domestic demand has stalled out since the spring. Final sales to domestic purchasers — which covers consumer spending and business investment — has grown at a 0.3% annual pace over the past two quarters.

    Real disposable incomes are growing at less than 1% annualized. Household wealth has fallen off a cliff, with the stock market
    SPX,
    -0.41%

    DJIA,
    -0.24%
    in a bear market and home equity beginning to fall. Wage growth is beginning to slow. Supply chains are improving.

    And the CPI excluding shelter has gone from rising at a 14% annual pace in the spring when the tightening began, to falling at a 1% annual pace over the past three months. Rate hikes are working!

    This benign picture on inflation may not persist. Inflation is still worrisome, particularly for essentials such as food, health care, new vehicles and utilities.

    But the Fed should adopt a more balanced view of the economy, no matter what the signals from the past say. No one wants a hard landing.

    Just ask NASA.

    More reported analysis from Rex Nutting

    Everybody is looking at the CPI through the wrong lens. Inflation fell to the Fed’s target in the past three months, according to the best measure.

    The Federal Reserve risks driving the economy into a ditch because it’s not looking at where inflation is heading

    Americans are feeling poorer for good reason: Household wealth was shredded by inflation and soaring interest rates

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  • Dow hits 2-month high as blue-chip gauge heads for longest winning streak since May

    Dow hits 2-month high as blue-chip gauge heads for longest winning streak since May

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    The Dow Jones Industrial Average rose nearly 600 points on Friday to its highest level in two months as the blue-chip gauge remained on track for a sixth straight session in the green in what would be its longest winning streak since May 27, according to Dow Jones Market Data.

    All three major indexes were trading higher as expectations that the Federal Reserve will shift toward smaller interest-rate hikes after its November meeting have offset weak earnings this week from some of the market’s biggest megacap technology names.

    How are stocks trading?
    • The S&P 500
      SPX,
      +1.67%
      gained 59 points, or 1.6%, to 3,866.

    • The Dow Jones Industrial Average
      DJIA,
      +1.98%
      rose 589 points, or 1.8%, to 32,623.

    • The Nasdaq Composite
      COMP,
      +1.80%
      advanced 181 points, or 1.7%, to 10,974.

    Both the S&P 500 and Nasdaq were on track to cement their second weekly gain in a row on Friday, although the tech-heavy Nasdaq has substantially lagged after Thursday’s performance, where it was the only one of the major indexes to finish in the red following abysmal earnings from Meta Platforms Inc.

    Barring an intraday turnaround, the Dow is on track to log its fourth straight weekly advance. It remains down just 10.2% so far this year.

    The blue-chip gauge has risen 5% so far this week, while the S&P 500 is up 3.1% and the Nasdaq has risen 1.1%.

    What’s driving markets?

    All eyes were on the Dow Friday as the blue-chip gauge was the only major index to reach new notable highs late this week as its advance during the month of October has somewhat ameliorated its losses for the year so far.

    The Dow has risen 13.5% since the start of the month, leaving it on track for its best October performance since it was created in the late 19th century.

    Perhaps the biggest reason for the Dow’s rise this month is tied to its composition. The average is generally light on technology stocks, while including more of the energy and industrial stocks that have outperformed this year.

    “The Dow just has more of the winners embedded in it and that has been the secret to its success,” said Art Hogan, chief market strategist at B.Reily Wealth.

    Despite some volatility in the premarket session, all three major indexes turned higher after the open as investors remained fixated on expectations for the Fed to down shift to smaller interest rate hikes after next week’s policy meeting — an expectation that endured after the latest reports on inflation and wage growth released Friday.

    See:Market expectations start to shift in direction of slower pace of rate hikes by Fed

    Brad Conger, deputy chief investment officer at Hirtle, Callaghan & Co., said Friday’s data didn’t interfere with mounting expectations that the Fed might soon pause its campaign of aggressive rate hikes.

    “Basically, the market is starting to price in a pause, not a pivot, but maybe a pause. The end is in sight,” Conger said.

    The September core personal consumption expenditures price index — the Fed’s preferred gauge of inflation pressures — came in roughly in line with economists expectations, while a more modest 1.2% gain in private wages and salaries in the third quarter was interpreted as a sign that wage growth may have finally peaked, according to Andrew Hunter, senior U.S. economist at Capital Economics.

    “The Federal Reserve has not yet broken the persistent trend in core inflation and so will likely stay aggressive at next week’s meeting. However, some areas of the economy show significant weakness and could build the case that the Fed downshifts to smaller rate hikes in 2023,” Jeffrey Roach, Chief Economist for LPL Financial in Charlotte, NC, said.

    The final reading of the University of Michigan consumer sentiment index for October added 1.3 index points from 58.6 in September, and was up slightly from an initial reading of 59.8 earlier in the month.

    See: GDP looked great for the U.S. economy, but it really wasn’t

    Since the start of the week, investors have digested a batch of disappointing numbers from some of America’s largest tech companies, which helped to sully the overall quality of S&P 500 earnings this quarter.

    On Thursday night, Amazon.com
    AMZN,
    -9.29%
    joined Microsoft Corp.
    MSFT,
    +2.75%    ,
    Alphabet Inc.
    GOOGL,
    +2.76%
    and Meta
    META,
    +0.34%
    by publishing disappointing earnings for the quarter that ended Sept. 30.

    But despite the disappointing results reported this week, in aggregate, S&P 500 firms are beating earnings expectations by 3.8%, according to Refinitiv data. That’s compared to a long-term average of 4.1% since 1994. However, if energy firms are excluded, the picture darkens substantially.

    Opinion: The cloud boom has hit its stormiest moment yet, and it is costing investors billions

    Shares of Amazon were off 10% after the e-commerce giant, which dominates the consumer-discretionary sector, predicted slower holiday sales and profit while also reporting slower-than-expected growth in its key cloud-computing business.

    Peter Garnry, head of equity strategy at Saxo Bank, said investors were unnerved by Amazon’s guidance cut.

    “The outlook for Q4 was what terrified investors with the retailer guidance operating income in the range $0-4 billion vs est. $4.7 billion and revenue of $140-148 billion vs est. $155.5 billion,” he said in a note.

    One notable exception to the downbeat earnings news this week was Apple Inc.
    AAPL,
    +7.21%    ,
    which proved a bright spot after the iPhone maker’s revenue and earnings topped forecasts, helped by record back-to-school sales of Macs. Shares were up nearly 0.9% in premarket trading.

    Companies in focus
    • Oil giants Chevron Corp. CVX and Exxon Mobil Corp. XOM were climbing on Friday after reporting strong results. Chevron is a Dow component.

    • Pinterest Inc. PINS also saw strong sales and profit in the third quarter, beating Wall Street expectations. Its shares were up more than 14%.

    • Intel Corp. INTC shares advanced more than 8% after reporting an earnings beat. The chip maker said it would cut costs by $3 billion next year, and lay off employees, as it trimmed its outlook again.

    See also: Live Markets coverage:

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  • U.S. stock futures give up early gains after Wall Street’s best week since June

    U.S. stock futures give up early gains after Wall Street’s best week since June

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    U.S. stock futures gave up strong early-session gains overnight after Wall Street notched its best week since June.

    After initially surging about 300 points, or 1% on Sunday evening, Dow Jones Industrial Average futures
    YM00,
    -0.02%
    were last about flat at midnight Eastern, while S&P 500 futures
    ES00,
    +0.05%
    and Nasdaq-100 futures
    NQ00,
    +0.16%
    similarly gave up sharp early gains.

    The U.S. Dollar Index
    DXY,
    +0.19%
    nudged higher, while the British pound
    GBPUSD,
    +0.12%
    surrendered much of an afternoon rally fueled by the possibility that Rishi Sunak will be Britain’s next prime minister, after Boris Johnson bowed out of the running. Crude prices
    CL.1,
    -0.55%
    ticked slightly higher Sunday.

    On Friday, the Dow Jones Industrial Average
    DJIA,
    +2.47%
     gained 748.97 points, or 2.5%, to close at 31,082.56. The S&P 500
    SPX,
    +2.37%
     climbed 86.97 points, or 2.4%, to finish at 3,752.75, and the Nasdaq Composite
    COMP,
    -0.81%
     rose 244.87 points, or 2.3%, to end at 10,859.72.

    The three major indexes scored their biggest weekly percentage gains since June last week. For the week, the Dow rose 4.9%, the S&P 500 gained 4.7% and the Nasdaq advanced 5.2%.  Yields on 10-year Treasury notes
    TMUBMUSD10Y,
    4.156%
    ended Friday at 4.228%.

    Investors were heartened by reports that the Fed may back off slightly from its aggressive rate-hiking policy later this year.

    The upcoming week is the busiest of the third-quarter earnings season, with 165 S&P 500 companies, including 12 Dow components reporting. That includes earnings from Big Tech companies Alphabet
    GOOGL,
    +1.16%    ,
    Amazon
    AMZN,
    +3.53%    ,
    Apple
    AAPL,
    +2.71%    ,
    Meta
    META,
    -1.16%
    and Microsoft
    MSFT,
    +2.53%    .

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  • The stock market is in trouble. That’s because the the bond market is ‘very close to a crash.’

    The stock market is in trouble. That’s because the the bond market is ‘very close to a crash.’

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    Don’t assume the worst is over, says investor Larry McDonald.

    There’s talk of a policy pivot by the Federal Reserve as interest rates rise quickly and stocks keep falling. Both may continue.

    McDonald, founder of The Bear Traps Report and author of “A Colossal Failure of Common Sense,” which described the 2008 failure of Lehman Brothers, expects more turmoil in the bond market, in part, because “there is $50 trillion more in world debt today than there was in 2018.” And that will hurt equities.

    The bond market dwarfs the stock market — both have fallen this year, although the rise in interest rates has been worse for bond investors because of the inverse relationship between rates (yields) and bond prices.

    About 600 institutional investors from 23 countries participate in chats on the Bear Traps site. During an interview, McDonald said the consensus among these money managers is “things are breaking,” and that the Federal Reserve will have to make a policy change fairly soon.

    Pointing to the bond-market turmoil in the U.K., McDonald said government bonds that mature in 2061 were trading at 97 cents to the dollar in December, 58 cents in August and as low as 24 cents over recent weeks.

    When asked if institutional investors could simply hold on to those bonds to avoid booking losses, he said that because of margin calls on derivative contracts, some institutional investors were forced to sell and take massive losses.

    Read: British bond market turmoil is sign of sickness growing in markets

    And investors haven’t yet seen the financial statements reflecting those losses — they happened too recently. Write-downs of bond valuations and the booking of losses on some of those will hurt bottom-line results for banks and other institutional money managers.

    Interest rates aren’t high, historically

    Now, in case you think interest rates have already gone through the roof, check out this chart, showing yields for 10-year U.S. Treasury notes
    TMUBMUSD10Y,
    3.898%
    over the past 30 years:

    The yield on 10-year Treasury notes has risen considerably as the Federal Reserve has tightened during 2022, but it is at an average level if you look back 30 years.


    FactSet

    The 10-year yield is right in line with its 30-year average. Now look at the movement of forward price-to-earnings ratios for S&P 500
    SPX,
    -0.03%
    since March 31, 2000, which is as far back as FactSet can go for this metric:


    FactSet

    The index’s weighted forward price-to-earnings (P/E) ratio of 15.4 is way down from its level two years ago. However, it is not very low when compared to the average of 16.3 since March 2000 or to the 2008 crisis-bottom valuation of 8.8.

    Then again, rates don’t have to be high to hurt

    McDonald said that interest rates didn’t need to get anywhere near as high as they were in 1994 or 1995 — as you can see in the first chart — to cause havoc, because “today there is a lot of low-coupon paper in the world.”

    “So when yields go up, there is a lot more destruction” than in previous central-bank tightening cycles, he said.

    It may seem the worst of the damage has been done, but bond yields can still move higher.

    Heading into the next Consumer Price Index report on Oct. 13, strategists at Goldman Sachs warned clients not to expect a change in Federal Reserve policy, which has included three consecutive 0.75% increases in the federal funds rate to its current target range of 3.00% to 3.25%.

    The Federal Open Market Committee has also been pushing long-term interest rates higher through reductions in its portfolio of U.S. Treasury securities. After reducing these holdings by $30 billion a month in June, July and August, the Federal Reserve began reducing them by $60 billion a month in September. And after reducing its holdings of federal agency debt and agency mortgage-backed securities at a pace of $17.5 billion a month for three months, the Fed began reducing these holdings by $35 billion a month in September.

    Bond-market analysts at BCA Research led by Ryan Swift wrote in a client note on Oct. 11 that they continued to expect the Fed not to pause its tightening cycle until the first or second quarter of 2023. They also expect the default rate on high-yield (or junk) bonds to increase to 5% from the current rate of 1.5%. The next FOMC meeting will be held Nov. 1-2, with a policy announcement on Nov. 2.

    McDonald said that if the Federal Reserve raises the federal funds rate by another 100 basis points and continues its balance-sheet reductions at current levels, “they will crash the market.”

    A pivot may not prevent pain

    McDonald expects the Federal Reserve to become concerned enough about the market’s reaction to its monetary tightening to “back away over the next three weeks,” announce a smaller federal funds rate increase of 0.50% in November “and then stop.”

    He also said that there will be less pressure on the Fed following the U.S. midterm elections on Nov. 8.

    Don’t miss: Dividend yields on preferred stocks have soared. This is how to pick the best ones for your portfolio.

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  • Will the stock market be open on Columbus Day?

    Will the stock market be open on Columbus Day?

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    It’s a regular day of business for the U.S. stock market on Monday, October 10, as equity exchanges stay open for Columbus Day, a federal holiday that also has been recognized as Indigenous Peoples’ Day.

    Bond markets, however, take the day off, which means a long weekend for the Treasury market, corporate bonds and other forms of tradable debt, starting after the close of business on Friday.

    Stocks have endured a brutal selloff in the first nine months of the year as the Federal Reserve has worked to fight inflation that’s been stuck near it highest levels since the early 1980s.

    See: Why stock-market bulls keep falling for Fed ‘pivot’ feints — and what it will take to put in a bottom

    The central bank’s main tool to battle inflation has been to dramatically increase interest rates, while also shrinking its balance sheet, in an effort to tighten financial conditions and squelch demand for goods and services, while also bringing down stubbornly high costs of living, including food, shelter and energy prices.

    The Fed’s focus in recent months also has been on cooling the roaring labor market, with strong wage gains in the past year viewed as one of several culprits behind elevated inflation.

    Friday’s jobs report for September pegged the unemployment rate as matching a prepandemic low of 3.5%, dashing hopes for now of a significant trend toward a pullback in the labor market.

    The S&P 500 index
    SPX,
    -2.80%
    tumbled 2.8% on Friday, the Dow Jones Industrial Average
    DJIA,
    -2.11%
    fell 630.15 points, or 2.1%, and the Nasdaq Composite Index
    COMP,
    -3.04%
    dropped 3.8%. An early October rally had offered some hope for a bounce for stocks, after a brutal first nine months for investors.

    Bonds also have undergone a painful repricing this year as volatility tied to the Fed’s monetary tightening campaign has eroded the value of bonds issued in the past decade of low rates.

    Read: Bond markets facing historic losses grow anxious about Fed that ‘isn’t blinking yet’

    The S&P 500 is down about 24% for the year, while the Dow is off 19% and the Nasdaq nearly 32%.The 10-year Treasury rate
    TMUBMUSD10Y,
    3.889%
    was near 3.9% Friday, after recently touching 4%, it’s highest since 2010

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  • Dow books 630-point drop after strong jobs data rattles investors, but stocks cement weekly gains

    Dow books 630-point drop after strong jobs data rattles investors, but stocks cement weekly gains

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    U.S. stocks finished sharply lower Friday, but still booked their best weekly gains in a month, after September jobs data showed an unexpected fall in the unemployment rate that’s anticipated to reinforce the Federal Reserve’s resolve to keep tightening monetary policy.

    Investors also weighed a profit warning at a leading microchip maker ahead of next week’s increase in quarterly earnings results.

    What happened
    • The Dow Jones Industrial Average
      DJIA,
      -2.11%
      fell 630.15 points, or 2.1%, ending at 29,296.79, but off the session low of 29,142.66.

    • The S&P 500
      SPX,
      -2.80%
      dropped 104.86 points, or 2.8%, closing at 3,639.66.

    • The Nasdaq Composite
      COMP,
      -3.80%
      shed 420.91 points, or 3.8%, to finish at 10,652.40.

    Stocks posted back-to-back losses, trimming weekly gains, but recorded their best weekly gains since Sept. 9, according to Dow Jones Market Data.

    Read: Will the stock market be open on Columbus Day?

    What drove markets

    Stocks recorded sharp losses Friday after the Labor Department said the U.S. economy added 263,000 jobs in September, while the unemployment rate declined to 3.5% from an August reading of 3.7%. Average hourly earnings rose 0.3%.

    Still, a powerful rally earlier in the week boosted all three major stock indexes to weekly gains, a departure from three straight weekly losses, according to Dow Jones Market Data.

    “It’s manic. We are all on edge,” said Kent Engelke, chief economic strategist at Capitol Securities Management, of the sharp market swings.

    “Any piece of good news is a cause for an explosive rally,” Engelke said by phone. On the flip side, he pegged technology-based trading “in an illiquid and emotional market” as exacerbating Friday’s selloff.

    “It’s a reflection that people have re-entered the mind-set that the Fed is going to be raising rates at a rapid clip, probably for longer than what they might have suspected at the start of the week,” said Robert Pavlik, a senior portfolio manager at Dakota Wealth Management, by phone.

    Pavlik expects the Fed to keep tightening financial conditions to try to head off inflation. “But once we turn the corner, and the economy slows down, the Fed probably will be more aggressive in cutting rates on the way down.”

    In addition, the Fed has been “draining liquidity from the system at a remarkable pace,” wrote Rick Rieder, BlackRock’s chief investment officer of global fixed income, in a Friday client note, while pointing to an astounding $1.3 trillion decline in the central bank’s balance sheet since the December 2021 peak.

    Pavlik at Dakota Wealth said he anticipates the Fed will start slowing interest rate hikes by mid-next year, which likely means continued pressure for the stock market, particularly with a backdrop of big oil-price
    CL00,
    +5.37%
    gains this week after global crude producers voted to cut monthly production and with the U.S. dollar’s
    DXY,
    +0.44%
    surge this year against a basket of rival currencies.

    U.S. crude oil prices climbed for a fifth day in a row on Friday to settle at $92.64 a barrel, while booking at 16.5% weekly gain.

    New York Fed President John Williams said Friday that benchmark interest rates likely need to hit 4.5% over time. The Fed’s policy rate now sits in a 3%-3.25% range, up from a zero-0.25% range a year ago.

    The benchmark 10-year Treasury rate
    TMUBMUSD10Y,
    3.889%
    climbed to 3.883% Friday, as the key metric used to gauge the affordability of credit for businesses, household and the economy posted 10 straight weeks of gains, according to Dow Jones Market Data.

    Read: Bond markets facing historic losses grow anxious of Fed that ‘isn’t blinking yet’

    Investors continued to hope for relief on the inflation front and will be monitoring next week’s release of the September consumer-price index, as well as corporate earnings season as it picks up.

    Companies in focus
    • Twitter Inc.
      TWTR,
      -0.43%
      shares fell 0.4% Friday after a judge delayed a looming trial between the company and Elon Musk to allow the Tesla Inc.
      TSLA,
      -6.32%
      CEO more time to close his $44 billion acquisition of the social media platform.

    • Besides the jobs report, investors weighed a profit warning from microchip maker Advanced Micro Devices Inc. AMD, which said the PC market weakened significantly during the quarter. AMD shares fell 13.9%, and rivals including Nvidia Corp. NVDA and Intel Corp. INTC also closed lower.

    • U.S. cannabis stocks were choppy Friday, with the AdvisorShares Pure US Cannabis ETF
      MSOS,
      -2.80%
      ending lower, following steep gains earlier in the week after President Joe Biden said the U.S. would consider de-scheduling cannabis from its current position as a Schedule 1 narcotic under federal law.

    —Steven Goldstein contributed reporting to this article

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  • Will the stock market be open on Columbus Day?

    Will the stock market be open on Columbus Day?

    [ad_1]

    It’s a regular day of business for the U.S. stock market on Monday, October 10, as equity exchanges stay open for Columbus Day, a federal holiday that also has been recognized as Indigenous Peoples’ Day.

    Bond markets, however, take the day off, which means a long weekend for the Treasury market, corporate bonds and other forms of tradable debt, starting after the close of business on Friday.

    Stocks have endured a brutal selloff in the first nine months of the year as the Federal Reserve has worked to fight inflation that’s been stuck near it highest levels since the early 1980s.

    The central bank’s main tool to battle inflation has been to dramatically increase interest rates, while also shrinking its balance sheet, in an effort to tighten financial conditions and squelch demand for goods and services, while also bringing down stubbornly high costs of living, including food, shelter and energy prices.

    The Fed’s focus in recent months also has been on cooling the roaring labor market, with strong wage gains in the past year viewed as one of several culprits behind elevated inflation.

    Friday’s jobs report for September pegged the unemployment rate as matching a prepandemic low of 3.5%, dashing hopes for now of a significant trend toward a pullback in the labor market.

    The S&P 500 index
    SPX,
    -3.03%
    tumbled 1.9% on Friday, the Dow Jones Industrial Average
    DJIA,
    -2.39%
    was down 1.5% and the Nasdaq Composite Index
    COMP,
    -3.89%
    was off 2.6%. And early October rally had offered some hope for a bounce for stocks, after a brutal first nine months for investors.

    Bonds also have undergone a painful repricing this year as volatility tied to the Fed’s monetary tightening campaign has eroded the value of bonds issued in the past decade of low rates.

    The S&P 500 is down about 23% for the year, the Dow off 19% and the Nasdaq off 31% since January. The 10-year Treasury rate
    TMUBMUSD10Y,
    3.884%
    was near 3.9% Friday, after recently touching 4%, it’s highest since 2010

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  • Treasury yields climb as U.S. unemployment drops and wage growth remains strong

    Treasury yields climb as U.S. unemployment drops and wage growth remains strong

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    Treasury yields rose Friday after the U.S. September payrolls report showed a surprise decline in unemployment as well as strong growth in wages, making a pivot in Fed policy less likely.

    What’s happening
    What’s driving markets

    The U.S. created 263,000 nonfarm jobs in September — roughly in line with expectations — with the unemployment rate falling to 3.5% from 3.7%, while the year-over-year growth rate in hourly wages was 5%.

    The unemployment decline was a surprise to economists who had anticipated a steady jobless picture.

    Federal Reserve Gov. Christopher Waller late on Thursday said he didn’t expect the jobs report to change anyone’s thinking at the central bank. New York Fed President John Williams will have the opportunity to comment on the data when he speaks at 10 a.m. Eastern.

    Ahead of the release, strategists at ING said the price action this week suggests the market has moved away from the early Fed policy pivot idea. “We may well have seen the structural top at 4% for the 10 year, or thereabouts, but we also feel we’re liable to see it at least one more time. There is a large fall in market rates to come, but we’re not at that point just yet,” they added.

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  • Dow falls 500 points Friday as stocks book third straight quarterly loss, set new 2022 lows

    Dow falls 500 points Friday as stocks book third straight quarterly loss, set new 2022 lows

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    U.S. stocks dropped sharply Friday, with major indexes posting their lowest finishes since 2020 and logging a third straight quarterly decline as investors grew more fearful that aggressive interest rate hikes by the Federal Reserve will drive the economy into a downturn in an attempt to quell inflation.

    What’s happening
    • The Dow Jones Industrial Average
      DJIA,
      -1.71%
      dropped 500.10 points, or 1.7%, to close at 28,725.51.

    • The S&P 500
      SPX,
      -1.51%
      dropped 54.85 points, or 1.5%, to end at 3,585.61.

    • The Nasdaq Composite
      COMP,
      -0.43%
      shed 161.88 points, of 1.5%, finishing at 10,575.61.

    The drop left the Dow and S&P 500 at their lowest since November 2020, while the Nasdaq posted its lowest close since July 29, 2020. The Dow dropped 8.8% in September, while the S&P 500 tumbled 9.3% and the Nasdaq lost 10.5%.

    For the quarter, the Dow dropped 6.7%, the S&P 500 declined 5.3% and the Nasdaq gave up 4.1%.

    What’s driving the market

    In keeping with the historical pattern, U.S. stocks suffered during the month of September as an assertive Federal Reserve helped push Treasury yields and the dollar higher, which in turn undermined equity valuations.

    See: It’s the worst September for stocks since 2008. What that means for October.

    Investors on Friday digested a reading from the personal consumption expenditure inflation index for August, which showed that core consumer prices climbed by 0.6% last month, more than Wall Street’s forecast of 0.5%. The core inflation measure excludes volatile food and energy prices.

    See: Cheaper gas holds down inflation, PCE shows, but the cost of everything else is still going up fast

    “That means the Fed will remain hell-bent on killing inflation. And the best way to do that is to increase rates, kill the housing market, and get rental costs down. The PCE doesn’t have housing and rents as a big component as the CPI does, so the fact that it is rising is a warning sign,” said Louis Navellier, founder of Navellier & Associates, in emailed comments.

    Read: Will October be another stock-market ‘bear killer’? Why investors need to tread carefully around seasonal trends.

    The reading largely confirmed similar data from the consumer-price index, another closely watched inflation barometer, which sent stocks lower earlier this month. Since that report was released just over two weeks ago, the S&P 500 has fallen more than 10%.

    Helping to underscore this point, data out of the eurozone showed inflation accelerated at a record pace last month.

    See: Eurozone Inflation posts new record high of 10% in September

    In other news, investors also heard from Fed Vice Chair Lael Brainard, who reiterated that the central bank would keep interest rates elevated to combat inflation, even if it harms the economy.

    See: Fed won’t pull back from rate hikes prematurely, Brainard says

    Since it will take time for high interest rates to bring inflation down, Brainard said the Fed is “committed to avoiding pulling back prematurely.”

    Investors were also keeping an eye on megacap tech stocks. Apple Inc. AAPL fell 3% on Friday after leading markets lower a day earlier following a downgrade by Bank of America.

    Need to know: Here’s why investors should start betting on Apple and the stock market now

    A final reading on the University of Michigan consumer-sentiment index for September showed consumers’ view of the economy improved somewhat during the month due to falling gas prices, even as their outlook remained broadly pessimistic.

    Investors are now facing “what may be one of the most important earning seasons in a very long time, with a major rally in the cards if earnings don’t disappoint, and if the bears are right, lead to a further leg down if earnings disappoint and 4th quarter estimates are cut,” Navellier said.

    See: U.S. consumers remain pessimistic about economy even as inflation fears wane

    Stocks in focus

    — Steve Goldstein and Barbara Kollmeyer contributed to this article

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