U.S. Stocks Face More Headwinds, Treasury Yields Soar to 9-month Highs

Barry Adams
03 Aug, 2023
New York City

Market indexes drifted lower for the second day following the U.S. long-term debt rating downgrade and investors focused on another batch of earnings. 

Southwest, DoorDash, PayPal, Etsy and Qualcomm were among the leading companies reporting earnings and about 600 companies are expected to release earnings before the end of the week. 

Stocks have been under pressure after Fitch Ratings cut the U.S. long term debt rating by one notch citing expected "fiscal deterioration" over the next three years as the U.S. government ramps up borrowing. 

 Treasury yields spiked to the levels last seen in November as bond traders worry that the Fed will struggle to bring down inflation below 3%. 

In addition, the U.S. Treasury plans to borrow at elevated pace for the next  five months and to finance its growing budget deficit. 

In overseas news, investors also reviewed the Bank of England lifting its key policy rates by 25 basis points and held out for more rate hikes if inflation stays elevated. 

The Bank of England also lowered its inflation outlook by the end of 2023 to 5% and forecasted inflation to drop to 2% level by the second quarter of 2025.  

The Euro Area inflation turned negative for the second month in June and dropped to the lowest level in the last three years. 

 

U.S. Indexes & Yields 

The S&P 500 index traded down 0.5% to 4,491.40 and the Nasdaq Composite declined 0.3% to 13,933.52. 

The yield on 2-year Treasury notes increased to 4.91%, 10-year Treasury notes inched higher to 4.14% and 30-year Treasury bonds edged down to 4.29%. 

Crude oil increased $0.40 to $79.88 a barrel and natural gas prices increased 4 cents to $2.51 a thermal unit. 

 

U.S. Stock Movers 

DoorDash Inc increased 0.6% to $86.50 after the delivery company reported better-than-expected revenue in its latest quarter. 

Qualcomm Inc plunged 9.6% to $116.80 after the semiconductor chipmaker reported weaker-than-expected revenue in the fiscal third quarter and forecasted lighter-than-expected revenue in the current quarter. 

Demand for smartphones in China has not rebounded to the projected levels and the China region accounts for about 61% of Qualcomm sales. 

Qualcomm said overall smartphone shipments are expected to decline in high single-digit percentage rate in 2023. 

PayPal Holdings declined 8.8% to $66.70 despite the company meeting earnings expectations set by some investors. 

The payment processing company posted adjusted earnings in the second quarter of $1.16 a share and revenue of $7.29 billion. 

Etsy Inc declined 9.6% to $86.88 after the company reported second quarter earnings that met analysts' estimates but forecasted revenue in the third quarter below expectations.