Rate Anxieties Resurface After Treasury Yields Rise

Barry Adams
06 Feb, 2023
New York City

Benchmark indexes on Wall Street traded lower after Treasury yields rose. 

Stocks faced headwinds for the second trading day in a row after bond yields rose 9 basis points in morning trading after rate worries resurfaced following an unexpected surge in non-farm payrolls in January. 

The U.S. dollar index advanced against a basket of major currencies and rose above 105 and traded near the level seen in early January. 

Dell Inc was the latest tech company to announce a layoff and the maker of computers said it plans to eliminate 6,500 jobs. 

The S&P 500 index fell 0.5% to 4,116.13 and the Nasdaq Composite index  declined 0.5% to 11,944.48. 

Crude oil gained 27 cents to $73.65 a barrel and natural gas fell 2 cents to $2.39 a thermal unit. 

The yield on 2-year Treasury notes inched up to 4.41%, 10-year treasury notes edged higher to 3.61% and 30-year Treasury notes traded up to 3.67%.  

 

Euro Area Retail Sales Fell In December

The seasonally adjusted retail sales volume in the Euro Area decreased 2.7% in December after rising 1.2% in November, according to an estimate from Eurostat, the statistical office of the European Union. 

The retail sales declined 2.8% on an annual basis in December from a year ago. 

For all of 2022, retail sales in the Euro Area barely increased 0.7% and rose 1.1% in the European Union.  

 

German Factory Orders and Sales In Focus 

Separately, the Destatis or the Federal Statistics Office of Germany said seasonally and price adjusted factory orders rose 3.2% on a monthly basis in December after falling 4.2% in November. 

December orders declined 0.6%, excluding large orders for electric utilities and aircraft and internal combustion engines. 

On a yearly basis, December orders declined 10.1% in December. 

German factory orders adjusted on a calendar basis in December are slightly ahead of pre-pandemic level by 1.2% from December 2019. 

However, sales of manufacturing companies fell 1.7% in December from November and rose 1.9% from a year ago. 

 

European Indexes Trend Lower 

European market indexes traded lower after stronger-than-expected U.S. jobs data for December dashed hopes that the U.S. Federal Reserve may pause its rate tightening cycle soon.  

The DAX index decreased 0.9% to 15,335.39, the CAC-40 index declined 1.5% and the FTSE 100 index dropped 0.9% to 7,825.82. 

The yield on 10-year German Bunds inched up to 2.28%, French bonds increased to 2.73%, UK Gilts to 3.26% and Italian bonds to 4.14%. 

Brent crude oil fell 4 cents to $79.89 and the Dutch TTF Spot price inched lower 71 euro cents to Є57.18 per MWh.  

The euro declined to $1.07, the British pound edged lower to $1.205 and the Swiss franc eased to 92.75 U.S. cents. 

 

Weaker Yen Drags Tokyo Stocks 

Asian markets also cooled in overnight trading following the Friday's release of U.S. jobs report. 

The yen fell 1% after the U.S. dollar advanced in the region's trading on the hopes of a continuation of the tightening cycle by the Federal Reserve after the jobs report signaled tighter-than-expected labor market conditions. 

The Nikkei 225 average increased 0.7% to 27,693.65 and the yen weakened to 132.78 against the U.S. dollar. 

 

Rising U.S.-China Tensions Knock China Stocks Lower 

Markets in Mainland China and Hong Kong were under pressure after tensions between the U.S. and China rose after the U.S. shot down a Chinese spy-balloon off the coast of North Carolina. 

Secretary of State Antony Blinken also canceled his visit to Beijing after the Pentagon's discovery of the alleged spy-balloon. 

Chinese authorities said that China came to know that one of its "weather monitoring balloons" had drifted in the U.S. airspace only after it was informed by the United States.  

“China is a responsible country. After the United States notified China, we immediately checked and gave feedback, and clearly requested the United States to act calmly, professionally, and handle it in a restrained manner,” China's foreign ministry spokeswoman Mao Ning said.  

The Shanghai Composite index decreased 0.7% to 3,238.70 and the Hang Seng index fell 2% to 21,222.16. 

 

Weaker Rupee and Adani Group Worries Overshadow India Stocks 

Stocks in Mumbai traded lower after the U.S. dollar rose and U.S.-China tensions rose and Adani Group stocks fell for the third week in a row despite supportive comments from the government and business leaders.  

The Sensex index decreased 0.5% 334.98 points to 60,506.90 and the Nifty index dropped 0.5% or 89.45 points to 17,764.60.