Stocks Drop 2% After Treasury Yields Spiked On Higher Rate Worries

Barry Adams
21 Feb, 2023
New York City

Stocks on Wall Street headed lower after worries of consumer spending, rising bond yields and elevated geopolitical tensions dented market sentiment.  

The yield on 10-year Treasury notes inched closer to 4.0% after retailers Walmart and Home Depot posted strong results but guided weaker growth. 

The growth outlook from two retail giants put investors on defensive as higher interest rates and inflation have started affecting consumer spending. 

Home Depot fell 6% after the home improvement retailer missed revenue estimate in the last quarter and the retailer estimated flat sales in the current fiscal year. 

Investors were also on the backfoot after tensions continued to rise between the two superpowers of the world, U.S. and China.  

U.S. Secretary of State Antony Blinken in an interview on Sunday raised the prospects of "Chinese companies providing non-lethal support to Russia for use in Ukraine." 

On the sidelines of the Munich Security Conference, the meeting between Secretary Blinken and Chinese Director of the Office of the Central Foreign Affairs Commission Wang Yi failed to calm down the rising tensions. 

 

U.S. Existing Home Sales Declined 12th Straight Month  

Existing home sales declined for the twelfth month in a row in January after home affordability kept buyers away. 

Sales of single-family homes, condominiums and co-ops declined 0.7% from the previous month in January to a seasonally adjusted annual rate of 4 million. 

Sales plunged 36.9% from the previous year and median price of a home increased 1.3% from a year ago to $359,000. 

 “Home sales are bottoming out,” said NAR Chief Economist Lawrence Yun. 

“Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines.”

Homes available for sale at the end of January increased 2.1% from December and 15.3% from a year ago to 980,000.

 

U.S. Markets In Review 

The S&P 500 index decreased 1.6% to 4,015.44 and the Nasdaq Composite index dropped 1.9% to 11,559.44. 

The yield on 2-year Treasury notes increased to 4.70%, 10-year Treasury yields jumped to 3.92% and 30-year Treasury bonds jumped to 3.97%.  

Crude oil and natural gas prices declined on the first day of trading this week and natural gas prices dropped below $2 a thermal unit, the first time since September 2020. 

Crude oil declined 83 cents to $76.40 a barrel and natural gas futures declined 13 cents to $2.09 a thermal unit. 

 

U.S. Movers

Home Depot fell 6% to $298.77 after the home improvement retailer reported weaker-than-expected quarterly results. 

The retailer said revenue in the fiscal fourth quarter ending in January increased 0.3% to $35.8 billion from the previous year. 

Comparable sales for the fourth quarter fell 0.3% and comparable sales in the U.S. decreased 0.3%.

Net earnings for the fourth quarter were $3.4 billion or $3.30 per diluted share compared with net earnings of $3.4 billion or $3.21 per diluted share a year ago. 

The home improvement retailer said sales and comparable sales growth to be approximately flat compared to fiscal 2022 as consumers shift aways from goods to services. 

Walmart Inc increased 0.7% to $147.56 after the discount retailer reported strong quarterly results as high income consumers search for bargains in the face of high inflation. 

Total revenues in the fourth quarter rose 7.9% to $164 billion and comparable sales in the U.S. rose 8.3% from the previous year and 13.9% from two-years ago. 

Sam’s Club comparable sales  increased 12.2% from a year ago and 22.6% in two years and membership income increased 7.1% to and membership count rose to a record high. 

Total transactions at Walmart U.S. locations increased 1.8% and average ticket size rose 6.3% from a year ago. 

Consolidated net income soared 76% to $6.3 billion from $3.6 billion and diluted earnings per share rose to $2.32 from $1.28 in the previous year. 

The company estimated fiscal 2024 comparable sales at Walmart U.S. locations to grow between 2% and 2.5%, slower than the 6.6% increase in the previous year. 

Consolidated sales in the fiscal 2024 are estimated to rise between 2.5% and 3.0%, compared to 6.7% in the prior year.