With Stocks On Hold, U.S. Treasury Yields Show Divided Bond Market

Barry Adams
08 Jun, 2023
New York City

Benchmark indexes traded sideways and investors debated rate path and health of the U.S. economy. 

Treasury yields diverged and the yield spread between 2-year and 10-year Treasury notes widened, indicating rising stress in the bond market ahead of the rate decision next week. 

The Federal Reserve is scheduled to announce its rate decision after the 2-day meeting on June 14. Investors are divided with some forecasting rate to increase by 25 basis points. 

Despite nine rate hikes over the last fourteen months, inflation has stayed above the Fed's target level of 2%. 

Lagged effects of rate hikes have still not worked its way to the broader economy, but elevated rates are likely to stay higher for longer. 

As earnings season for the first quarter is winding down, investors are revising expectations downward for the current quarter. 

Stretched household budgets because of elevated inflation are likely to keep consumer spending in check for the rest of the year. 

In addition, higher rates and tighter credit conditions after the recent collapse of several regional banks is also negatively impacting lending to middle America.  

 

Jobless Claims Advanced Third Week In a Row  

The initial claims of jobless benefits increased to 261,000 in the week ending on June 3, the U.S. Department of Labor reported Thursday. 

Weekly claims rose to the highest level since October 2021 and rose for the third week in a row. 

Initial claims in the previous week were slightly revised higher to 233,000 from the previous estimate of 232,000. 

Continuing claims declined 37,000 1.757 million from 1.794 million in the previous week. 

 

U.S. Indexes & Yields 

The S&P 500 index increased 2.58 points to 4,269.62 and the Nasdaq Composite increased 0.2% to 13,135.62. 

The yield on 2-year Treasury notes decreased to 4.45%, 10-year Treasury notes edged up to 3.79% and 30-year Treasury bonds rose 3.95%. 

Crude oil increased $0.36 to $72.93 a barrel and natural gas prices increased 1 cent to $2.34 a thermal unit. 

 

U.S. Stock Movers

GameStop Corp declined 21.6% to $20.46 after the company ousted chief executive Matthew Furlong and said Ryan Cohen will take over as executive chairman. 

Signet Jewelers Limited dropped 9% to $63.01 after the specialty retailer lowered its revenue and earnings estimate for the full-year and forecasted weaker-than-expected second quarter revenue and operating income. 

Lucid Group increased 3.1% to $6.60 after the electric vehicle maker's head of China operations Zhu Jiang said the company is preparing to launch its operations and enter the Chinese market. 

HashiCorp Inc plunged 21.4% to $27.40 after the cloud computing company reported weaker than expected earnings. 

In addition, the company announced its plan to reduce its workforce by 8% citing macroeconomic headwinds.