New York Stock Market Declines Early Amid Sharp Rise in Treasury Yields

The three major indices of the U.S. New York stock market showed a simultaneous decline in the early session on the 3rd (local time) due to the rise in Treasury yields.

At around 10:10 a.m. at the New York Stock Exchange, the Dow Jones Industrial Average was trading at around 33,203, down 230.08 points (0.69%) from the previous close. The S&P 500, which focuses on large-cap stocks, was down 37.46 points (0.87%) to around 4,250, and the tech-heavy Nasdaq was down 149.95 points (1.13%) to around 13,157.

Currently, eight sectors in the S&P 500, excluding materials, industrials, and consumer staples, are showing weakness. McCormick & Company is trading more than 8% lower compared to the previous close due to weaker-than-expected quarterly results. Point Biopharma Global surged 84% on news that Eli Lilly is planning an acquisition. HP rose more than 2% after Bank of America (BoA) upgraded its investment rating. Among other major tech stocks, Amazon is down about 2%, Tesla is down about 1%, and Airbnb fell more than 3%.

[Image source=Reuters Yonhap News]

Investors kept a close eye on Treasury yields, the dollar's movement, and economic indicators amid ongoing concerns about prolonged high interest rates and tightening. In the New York bond market, the 10-year U.S. Treasury yield is currently around 4.69%. During the session, it briefly surpassed 4.75%, marking a new 16-year high. The 2-year yield, sensitive to monetary policy, stood at about 5.08%. The 30-year yield exceeded 4.86%, reaching its highest level since May 2009. The dollar index, which measures the value of the dollar against six major currencies, surpassed the 107 level.

Adam Crisafulli, founder of Vital Knowledge, said, "The stock market is attempting a rebound, but the upward momentum remains restrained," adding, "Investors seem willing to miss out on a 2-4% rise until they gain confidence in a sustained bull market." Mark Newton, Chief Technical Strategist at Fundstrat, noted in an investor memo, "It is highly likely that the U.S. stock market is in the process of bottoming out and may hit its lowest point this week."

Now, investors' attention is focused on employment indicators such as the Job Openings and Labor Turnover Survey (JOLTs), ADP employment report, and Labor Department employment report, which will be released consecutively throughout the week. The August job openings report released this morning showed 9.61 million openings, far exceeding the Dow Jones estimate of 8.8 million, indicating that the labor market remains robust. This is the highest level since April.

The key will be the Labor Department employment report to be released on the 6th. Nonfarm payrolls for September are expected to have slowed to 163,000 compared to the previous month. Attention is also focused on the unemployment rate, which hit 3.7% in August, the highest since February 2022.

These indicators could influence the Federal Reserve's monetary policy decisions. If the labor market continues to show signs of overheating despite the Fed's cumulative tightening, the likelihood of additional rate hikes may increase. Recent comments from Fed officials, including Vice Chair Michael Barr, who signaled prolonged high rates, and Governor Michelle Bowman, who emphasized the need for further rate hikes, have been interpreted as hawkish.

Currently, the market largely expects a rate hold in November. According to the CME FedWatch tool, the federal funds futures market is pricing in more than a 76% chance that the Fed will keep rates unchanged in November. The probability of a baby step (a 0.25 percentage point rate hike) stands at around 23%. There are two remaining FOMC meetings this year, in November and December.

European stock markets are also falling across the board. Germany's DAX index is down 0.58%, the UK's FTSE index is down 0.12%, and France's CAC index is down 0.64% compared to the previous close.