U.S. Stocks Meander and Bond Yields Rise

Barry Adams
20 Dec, 2022
New York City

Stocks on Wall Street opened lower and bond yields inched higher after a selloff in the global bond market. 

The worldwide bond selloff was sparked by a surprise move by the Bank of Japan in lifting the upper limit of the government bond yield, though a technical move, but caught the market by surprise. 

The  Bank of Japan also left its key lending rate at -0.1% but the widening of the yield range confirmed the central bank's readiness in ending six years of loose monetary policy. 

The Bank of Japan is the last major central bank to adjust rate policy, following a hike in rates by more than 20 central banks. 

Despite the multiple rate hikes, real rates are still negative in G7 countries and not restrictive in limiting economic activities. 

Moreover, investors are anticipating downward earnings revision as central banks are looking to dampen economic activities and tame 4-decade high inflation in the Euro Area and in the United States. 

In addition, China is battling the fallout from the strict zero-Covid restrictions and the property sector is in deep financial malaise. 

 

Market Indexes Drop 

The S&P 500 index declined 0.4% to 3,803.89 and the Nasdaq Composite index fell 0.7% to 10,476.41. 

Crude oil inched up 61 cents to $76.03 a barrel and natural gas futures prices declined 44 cents to $5.41 a thermal unit.   

The yield on 2-year Treasury notes increased to 4.30%, 10-year Treasury notes rose to 3.68% and 30-year Treasury bonds edged up to 3.70%. 

 

Housing Starts Edged Lower 

U.S. housing starts declined 0.5% to a seasonally adjusted 1.427 million annual rate after dropping downwardly revised 2.1% in October, the U.S. Census Bureau reported Tuesday. 

Single family housing starts declined 4.1% to an annual pace of 828.000 and multi-family starts jumped 4.8% to 584,000. 

Housing market is struggling under rising mortgage rates and record home prices, keeping many first time buyers away from the market. 

 

European Markets Wavered, Natural Gas Volatile After Pipe Explosion

European markets pared losses and investors continue to assess the hawkish stance from the central banks and worry that rising rates and elevated inflation are likely to drag the economy into a recession. 

The DAX index dropped 0.5% to 13,869.66, the CAC-40 index declined 0.4% to 6,445.00 and the FTSE 100 index inched up 2.45 points to 7,363.93. 

Natural gas prices were volatile and traded as low as