2023-10-20 23:52:35
Bond yields exceed 5% and put pressure on US stocks… and Dow Jones loses 286 points
US stocks continued to decline in trading on Friday, under pressure from the rise in the yield on ten-year Treasury bonds, which exceeded 5% for the first time since 2007, with the main indices ending the week’s trading in the red zone, while the ignition of the conflict in Gaza adds more concerns to world markets.
The losses accelerated in the final minutes of trading on the last day of the week, with the Dow Jones Industrial Average ending the day down by 0.86%, after losing 286 points, and the S&P 500 index losing 1.26%, while the loss in the Nasdaq index reached 1.53%.
The yield on 10-year Treasury bonds exceeded 5% for the first time in 16 years on Friday, which was considered a new obstacle to American economic growth, which could be added to the strongest tightening policy witnessed by the largest economy in the world in more than four decades. But the return declined before the end of the day to record 4.92%.
One analyst told CNN on Friday: “The markets do not seem to believe that the Federal Reserve will stop raising interest rates.”
US bond yields, especially ten-year bonds, affect the interest rates applied to mortgages, credit cards, and car loans, and also deprive stock markets of a significant proportion of the funds available for investment.
Relatedly, European stocks fell on Friday, recording the largest weekly loss in seven months, coinciding with increasing fears of the expansion of the conflict in the Middle East, rising government bond yields, in addition to disappointing earnings reports.
The STOXX 600 index of European stocks hit its lowest level in seven months, down 1.4%.
The index fell by 3.4% during the week, as fears of a widening conflict fueled concern about the disruption of oil supplies, with interest rates still expected to remain high for a longer period, which affected morale.
The rise in government bond yields in Europe and the United States led to increased risk aversion, as central bank policymakers, including Federal Reserve Chairman Jerome Powell, indicated that interest rates may remain high for extended periods.
Corporate profits did not support sentiment much, with analysts warning of further pressure on profit margins, as a result of rising interest and energy prices.
The mining sector led the decline and fell by 3.4%, affected by a 7.2% decline in the shares of Boliden Company, after a larger than expected decline in third-quarter profits, due to higher costs.
The travel and entertainment index fell 2.3%, with InterContinental Hotels Group shares falling 4.5%, after a slowdown in quarterly net growth.
Financial stocks were also a major drag, with UBS Bank stock falling 2.8%.
Oil prices fell at settlement today, Friday, after the Palestinian resistance released two American detainees from Gaza, which raised hopes that the Israeli-Palestinian crisis would not worsen, prevent it from spreading to the rest of the Middle East region, and disrupt oil supplies.
Brent crude futures fell 22 cents, or 0.2%, to $92.16 per barrel at settlement.
US West Texas Intermediate crude futures for November delivery, which expired after settlement on Friday, fell 62 cents, or 0.7%, to $88.75 per barrel. The most widely traded December contract for West Texas Intermediate crude fell 29 cents at settlement to $88.08 a barrel.
Abu Ubaida, spokesman for the Izz al-Din al-Qassam Brigades, announced today, Friday, the release of two American detainees, a mother and her daughter, for “humanitarian reasons” in response to Qatari mediation efforts in the war with Israel.
Futures for both crude oils rose by more than a dollar per barrel in the first hours of today’s session, amid growing fears of an intensification of the conflict.
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