Stocks retreated Friday as a surge in the 10-year Treasury yield prompted broader concerns about the state of the economy.
The yield on the benchmark 10-year Treasury crossed 5 per cent for the first time in 16 years on Thursday, a level that could ripple through the economy by raising rates on mortgages, credit cards, auto loans and more. Not to mention, it offers investors an attractive alternative to stocks.
The 10-year yield hit 5.001 per cent around 5 p.m. ET Thursday, the first time it has traded above that level since July 2007. It retreated from that threshold through Friday.
The 30-year U.S. Treasury yield also hit a high last seen in July 2007. Meanwhile, the 30-year fixed mortgage rate reached 8 per cent this week, a level not seen since 2000.
The S&P 500 shed 1.26 per cent to 4,224.16 and registered its first losing week in three. The Nasdaq Composite dropped 1.53 per cent to 12,983.81. The Dow Jones Industrial Average lost 286.89 points, or 0.86 per cent, to end at 33,127.28, dragged down in the session by American Express following a mixed earnings report.
Regional banks tumbled as higher rates raised worries about the sector’s exposure to Treasury securities that are falling in value. Regions Financial led the decline after a weak earnings report, falling more than 12 per cent. The SPDR S&P Regional Banking ETF (KRE) lost 4 per cent.
American Express shares dipped more than 5 per cent. The company’s earnings per share beat expectations, but revenue was about in line with estimates. Non-interest revenue, meanwhile, missed a StreetAccount consensus forecast.
Solar stocks were also among the biggest decliners. The move came after SolarEdge slashed its third-quarter revenue guidance, sending the stock down 27 per cent.
Concerns over higher rates weighed on the market during the week. The S&P 500 lost 2.4 per cent on the week, while the Dow slipped 1.6 per cent. The Nasdaq shed 3.2 per cent, notching its second straight week of losses.
Nvidia, the closely followed artificial intelligence stock, was on pace for its worst week since September 2022 with a loss of nearly 9 per cent. It was one of multiple semi stocks that struggled this week after the U.S. Department of Commerce announced plans to tighten restrictions on sales of advanced artificial intelligence chips to China.
Tesla ended the week more than 15 per cent lower, its worst week since December 2022. The electric vehicle maker, which reported earnings on Wednesday, missed Wall Street expectations on both lines for the first time since 2019.
In commodity-related news, China is planning export controls for graphite products to protect national security, following similar measures on gallium and germanium. Major graphite buyers from China include Japan, the United States, India, and South Korea.
Oil prices dropped slightly on Friday as the release of two US hostages by an Islamist group in Gaza raised hopes of easing tensions in the Israeli-Palestinian crisis. Brent crude futures edged down 0.2 per cent, while West Texas Intermediate for November delivery declined 0.7 per cent.
Turning to US sectors, all closed lower on Friday. Energy was the worst performer, whilst Consumer Staples recorded the fewest losses.
Futures
The SPI futures are pointing to a 0.9 per cent fall.
Currency
One Australian dollar at 7:40 AM was buying 63.19 US cents.
Commodities
Gold added 0.70 per cent. Silver gained 2.05 per cent. Copper lost 1.06 per cent. Oil fell 0.33 per cent.
Figures around the globe
European markets closed lower. London’s FTSE fell 1.30 per cent, Frankfurt lost 1.64 per cent, and Paris closed 1.52 per cent lower.
Turning to Asian markets, Tokyo’s Nikkei lost 0.54 per cent, Hong Kong’s Hang Seng fell 0.72 per cent while China’s Shanghai Composite closed 0.74 per cent lower.
On Friday, the Australian share market closed 1.16 per cent lower at 6,901.
Ex-dividends
New Hope Corporation (ASX:NHC) is paying 30 cents fully franked
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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