[New York Stock Market] Mixed Close Despite Shutdown Crisis Resolution... Rising Treasury Yields

The three major indices of the U.S. New York stock market closed mixed on October 2, the first trading day of October (local time). The Dow Jones Industrial Average, composed of blue-chip stocks, ended slightly lower despite eased concerns over a U.S. federal government shutdown. Treasury yields showed an upward trend.

On the day at the New York Stock Exchange (NYSE), the Dow closed at 33,433.35, down 74.15 points (0.22%) from the previous session. In contrast, the large-cap S&P 500 index rose 0.34 points (0.01%) to 4,288.39, and the tech-heavy Nasdaq index gained 88.45 points (0.67%) to close at 13,307.77.

Within the S&P 500, technology, communication, and consumer discretionary stocks rose, while energy, materials, and real estate stocks declined. Notably, utility stocks fell by more than 4%. Among utility stocks, NextEra Energy dropped nearly 9% compared to the previous session. AES and PG&E also fell by around 6% each. Electric vehicle maker Tesla ended slightly higher despite third-quarter vehicle deliveries (435,059 units) falling short of Wall Street expectations. Rivian, whose third-quarter deliveries (15,564 units) exceeded estimates, fell more than 2%. Nvidia rose nearly 3% after Goldman Sachs recommended buying the stock.

[Image source=Reuters Yonhap News]

On this day, investors focused on Treasury yields, economic indicators, and remarks from Federal Reserve (Fed) officials amid eased shutdown concerns on the first trading day of October. Earlier, the U.S. Congress passed a 45-day temporary budget bill just hours before the deadline for the 2024 federal budget. Kevin Gordon, Chief Investment Strategist at Charles Schwab, assessed that the market generally pays little attention to government shutdowns. He noted that the average rise in the S&P 500 from the start to the end of past shutdowns was basically steady, adding, "The situation and environment we face are much more important."

Treasury yields continued to rise, supported by expectations of prolonged high interest rates. In the New York bond market, the benchmark 10-year U.S. Treasury yield surpassed 4.7% intraday, hitting its highest level since October 2007. The 2-year yield, sensitive to monetary policy, also rose to around 5.11%.

The September ISM Manufacturing Purchasing Managers' Index (PMI) released on the day came in at 49.0, exceeding both market expectations (48) and the previous month (47.6). The September manufacturing PMI compiled by S&P Global also surpassed preliminary estimates, coming in at 49.8 versus 48.9.

Fed officials continued to make remarks. Fed Chair Jerome Powell, meeting with community and business leaders in York, Pennsylvania, said, "The U.S. economy is still dealing with the aftermath of the COVID-19 pandemic." However, he did not comment on monetary policy or economic outlook during his remarks.

Fed Vice Chair Michael Barr, speaking in New York, said, "We have now reached a point where we can proceed cautiously," adding, "The most important question at this point is not whether additional rate hikes are needed this year, but how long rates should be maintained at sufficiently restrictive levels." He also predicted that high interest rates would persist for a long time.

Fed Governor Michelle Bowman also emphasized the need for further rate hikes. She expressed concern that recent oil price increases could disrupt the trend of easing inflation, warning of "risks that could reverse some of the progress on inflation." She stressed, "Additional tightening policies are necessary to continue lowering inflation."

Jeremy Siegel, professor at the Wharton School of the University of Pennsylvania, appeared on CNBC and assessed that despite the recent rise in Treasury yields, the U.S. economy remains generally strong. Regarding core inflation indicators, he predicted they would remain "stubborn." However, Professor Siegel noted that the cumulative tightening is having some effects and expected the Fed not to raise rates in the upcoming November meeting.

Oil prices fell for the third consecutive trading day ahead of the Joint Ministerial Monitoring Committee (JMMC), a consultative body of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC major oil producers. On the New York Mercantile Exchange, November delivery West Texas Intermediate (WTI) crude closed at $88.82 per barrel, down $1.97 (2.17%) from the previous session.