S&P 500 and Nasdaq Lacked Direction, 10-month High In Crude Oil, short Term Treasury Yields Advanced

Boris Petrov
18 Sep, 2023
New York City

Market indexes on Wall Street traded down as investors reviewed the rise in crude oil prices and interest rate decisions from the Federal Reserve. 

Crude oil prices advanced to a new high in 2023 and reached the level last seen in November after supply worries dominated the energy market. 

Futures of immediate month delivery of West Texas crude oil jumped above $91 a barrel and Brent crude oil crossed $94 a barrel. 

Crude oil prices advanced for the third week in a row and jumped nearly 30% in the third quarter on the expectations of a demand recovery in China and curtailed energy supplies from Russia and Saudi Arabia. 

The steady rise in oil price has got the bond market worried about the rebound in consumer price inflation. 

The yield on the 2-year U.S. Treasury jumped above 5% and reached a level not seen since March, on the worries of higher inflation following the persistent rise in crude oil prices.  

Investors are widely anticipating that the  U.S. Federal Reserve is likely to hold rates at the conclusion of a 2-day meeting ending on Wednesday. 

Despite the multiple rate hikes over the last sixteen months, inflation has hovered above the Fed's 2% target. 

Moreover, while the Fed's policymakers talk tough on fighting inflation, Chairman Jerome Powell has refrained from setting a deadline to bring down inflation to 2%. 

Fed's unwillingness to set a deadline for bringing down inflation, highlights loose monetary policy and rates are still not restrictive enough.  

 

U.S. Indexes & Yields 

The S&P 500 index inched down 0.1% to 4,444.78 and the Nasdaq Composite decreased 0.1% to 13,697.35. 

The yield on 2-year Treasury notes hovered near 5.05%, 10-year Treasury notes inched slightly higher to 4.32% and 30-year Treasury bonds edged up to 4.41%. 

Crude oil increased $0.75 to $91.51 a barrel and natural gas prices increased 2 cents to $2.66 a thermal unit. 

The dollar index edged slightly lower to 105.24, the level last seen in March but higher than the low of 99.85 on July 13.