TODAY’S NEWS
The ongoing selloff in global bonds intensified on Wednesday, weighing on Wall Street stocks and bolstering the dollar as robust U.S. economic data lowered hopes for imminent aggressive interest rate cuts by the Federal Reserve.
The 10-year U.S. Treasury yield climbed to a peak of 4.73%, the highest since April 2024, before settling slightly at 4.687%. This followed a 7-basis-point rise on Tuesday, reflecting continued pressure in the bond market.
Wall Street showed mixed performance during the session. The S&P 500 initially dipped but managed to close higher, alongside the Dow Jones, while the Nasdaq closed slightly lower. Gains were driven by sectors such as healthcare, materials, consumer staples, real estate, and industrials, while communication services and energy lagged.
The bond selloff accelerated after reports surfaced that U.S. President-elect Donald Trump may declare a national economic emergency to implement sweeping tariffs. Analysts noted that Trump’s policies, including tariffs and tax cuts, could exacerbate inflationary pressures.
Key stock indexes closed with small changes:
- Dow Jones Industrial Average rose 0.25% to 42,635.20.
- S&P 500 increased 0.16% to 5,918.25.
- Nasdaq Composite fell 0.06% to 19,478.88.
In Europe, the STOXX 600 index slipped 0.2%, with most regional markets following suit. The MSCI global stock index dipped 0.12% to 845.95. Bond yields in Europe also surged, with German 10-year yields reaching a six-month high and UK gilt yields hitting 4.82%, their highest level since 2008.
Recent strong U.S. economic data has diminished the likelihood of significant Fed rate cuts. Markets are currently pricing in only one 25-basis-point cut in 2025, with a 60% probability of a second cut. Investors now await Friday’s non-farm payrolls report following weaker-than-expected private payroll and jobless claims data earlier in the week.
Analysts expressed concern about the impact of rising yields on asset allocation. Michael Purves of Tallbacken Capital Advisors highlighted that 10-year Treasury yields approaching 5% could shift investor preferences away from equities.
The dollar gained strength, with the dollar index rising 0.29% to 109.02. The euro weakened by 0.23%, trading at $1.0315.
Oil prices fell as the stronger dollar and increased U.S. fuel inventories weighed on the market. Brent crude dropped 1.16% to $76.23 per barrel, while U.S. West Texas Intermediate declined 1.25% to $73.32.
Gold prices rose amid market uncertainty. Spot gold increased 0.51% to $2,662.90 per ounce, while U.S. gold futures ended 0.3% higher at $2,672.40.
Mark Malek of SiebertNXT warned that if bond yields reach 5%, equity markets could face additional challenges, as investors may hesitate to continue driving stock prices higher.
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