Rising US bond yields will again dominate Wall Street this week and other markets as investors grapple with the most significant rise in yields since February of this year.
The yield on the US 10 year Treasury bond ended a big week at 3.22% – a month ago the yield was at 2.88% and a year ago it was around 2.36%.
The 10-year yield touched 3.24%, the highest since May 2011. Yields on the more sensitive two-year bond rose 1 point at 2.88% after earlier touching 2.90%, an over 10-year high. The 30-year bond yield climbed 5 points to 3.40%, the highest since July 2014.
The Australian 10-year bond yield ended around 2.71% on Friday night, 10 points down on the yield a year ago.
Strong US economic data and rising expectations for Fed tightening saw the $US rise and this saw the $A fall below $US0.71 to close at 70.52 US cents. That’s the lowest close since early 2016.
While economists point out that the solid rise is due to the realization the US economy is doing well (thanks to the hundreds of billions pumped in from the Trump tax cuts, buybacks, and higher dividends), the surge is not impacting wages as much as feared or jobs.
The September jobs report saw 134,000 new jobs created lower than forecast (it could have been low because of the impact of Hurricane Florence on the Mid-Atlantic States) as economists were looking for 185,000 new jobs reported.
Wages growth those slowed to an annual rate of 2.8% from 2.9% which was despite the jobless rate hitting 3.7% which is the lowest since 1969.
The jobless rate added to the concerns about the hot economy (wages were ignored) and bond yield climbed and Wall Street shares fell.
The Dow fell 180.43 points, or 0.68%, to 26,447.05, the S&P 500 lost 16.04 points, or 0.55%, to 2,885.57 and the Nasdaq Composite dropped 91.06 points, or 1.16%, to 7,788.45.
For the week, the S&P fell 0.98%, the Dow slipped 0.04% and the Nasdaq dropped 3.2%. It was the biggest weekly decline for the Nasdaq since March as tech stocks get caught up in the China trade war argument.
Technology stocks bore the brunt of Friday’s weakness as investors took profits from the sector. The NYSE Fang + index, which tracks the so-called Fang (Facebook, Apple, Netflix, Google (Alphabet) stocks and a number of other tech giants, fell 2.1%.
Amazon and Apple both fell more than 1%, while Netflix and Tesla dropped 3.4% and 7% respectively. Tech stock losses also dragged down the wider stock market. The info tech sector lost 1.6% and was the worst performer on the S&P 500. It was followed by a 1% loss for the communications services sector.
Friday’s fall was the second in as many days. On Thursday, the Dow suffered its biggest one-day percentage drop since August, while both the S&P and the Nasdaq logged the biggest daily drop since late June.
Besides the near 1% dip in US shares over the week, Eurozone shares lost 1.8%, Japanese shares fell 1.4% and Australian shares fell 0.4%. China was closed for the Golden Week holiday.
Oil, gold and iron ore prices rose but copper and other metal prices fell.