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Rising Treasury Yields Contribute To Weakness On Wall Street

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May 29 2024 4:31PM

Following the mixed performance seen during Tuesday’s session, the major U.S. stock indexes all moved to the downside during trading on Wednesday. The Dow showed a notable decline, falling to its lowest closing level in almost a month.

The major averages all finished the day firmly in negative territory. The Dow (DOWI:DJI) slumped 411.32 points or 1.1 percent to 38,441.54, the S&P 500 (SPI:SP500) slid 39.09 points or 0.7 percent to 5,266.95 and the Nasdaq (NASDAQI:COMP) fell 99.30 points or 0.6 percent to 16,920.58.

The weakness on Wall Street came amid a continued increase by treasury yields, with the yield on the benchmark ten-year note climbing to its highest levels in nearly a month.

The ten-year yield jumped above 4.5 percent on Tuesday, as auctions of two-year and five-year notes attracted well below average demand.

The continued advance by treasury yields has added to recent concerns about the outlook for interest rates ahead of key inflation data later in the week.

On Friday, the Commerce Department is due to release its report on personal income and spending in the month of April, which includes readings on inflation said to be preferred by the Federal Reserve.

The inflation data could have a significant impact on the outlook for interest rates ahead of the Fed’s next monetary policy meeting on June 11-12.

In an interview with CNBC on Tuesday, Minneapolis Fed President Neel Kashkari said he needs to see “many more months of positive inflation data” before he would consider cutting interest rates.

Kashkari, who does not have a vote on the rate-setting Federal Open Market Committee this year, also said he could not rule out raising interest rates if inflation fails to slow.

Traders may also have been cashing on recent strength in the tech sector, which drove the Nasdaq to a new record closing high on Tuesday amid a surge by shares of Nvidia (NVDA).

Sector News

A pullback by the price of crude oil led to considerable weakness among energy stocks, dragging both the NYSE ARCA Oil Index and the Philadelphia Oil Service Index down by 2.2 percent.

Airline stocks also saw substantial weakness on the day, with the NYSE Arca Airline Index plunging by 2.0 percent to a nearly six-month closing low.

America Airlines (NASDAQ:AAL) led the sector lower, plummeting by 13.5 percent after the airline lowered its second quarter earnings guidance.

Gold stocks also saw significant weakness amid a decrease by the price of the precious metal, moving notably lower along steel, semiconductor and telecom stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan’s Nikkei 225 Index fell by 0.8 percent, while Hong Kong’s Hang Seng Index plunged by 1.8 percent.

The major European markets have also moved to the downside on the day. While the French CAC 40 Index tumbled by 1.5 percent, the German DAX Index slumped by 1.1 percent and the U.K.’s FTSE 100 Index slid by 0.9 percent.

In the bond market, treasuries extended the notable downward move seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, surged 8.2 basis points to a nearly one-month closing high of 4.624 percent.

Looking Ahead

Reports on weekly jobless claims, first quarter GDP and pending home sales may attract attention on Thursday, although trading activity may be somewhat subdued ahead of the release of the closely watched inflation data on Friday.

SOURCE: RTTNEWS