Selloff Resumes On Wall Street After Bond Yields Advanced to 16-year Highs

Barry Adams
26 Sep, 2023
New York City

Stocks resumed downward slide and extended previous week's losses after gains in Monday's trading. 

Benchmark indexes fell 1% as fear of rising rates gripped market sentiment and investors sold high growth and tech stocks. 

Investors have been bidding stocks up for the first six months of the year on the hopes that interest rates are closer to peak rates. 

However, investors changed their views on interest rate trajectory two weeks and finally accepted the Fed's views on interest rates. 

So what convinced investors, the Fed's forward projections released at the time of announcing rate decision after the two-day meeting, suggested at least one more rate hike this year, and fewer rate cuts in 2024. 

Moreover, the rebound in crude oil prices also contributed to the market sentiment turning bearish on bonds. 

With yields on 2-year and 10-year Treasury notes at 16-yea highs and 30-year Treasury bonds at 11-year highs, higher rates are beginning to have impact on stock valuations. 

However, despite multiple rate hikes, the U.S. economy is still expected to grow at 2.1% in 2023, according to the Fed's latest projection, sharply higher than the previous estimate of 1%, release in June. 

But investors decided to focus on the Fed's higher-for-longer stance and overlooked the resilient economy and strong labor market conditions. 

In Wednesday's trading, all sectors declined and technology and consumer discretionary sectors led with losses of 1.4% but energy and healthcare sectors lagged the market decline with losses of 0.3%. 

 

New Home Sales Declined In August 

New single-family home sales declined 8.7% to a seasonally adjusted annualized rate of 675,000 in August, the Commerce Department reported today.  

Home sales fell the most in 11 months  from the upwardly revised 8% jump in the previous month. 

The median price of new home sold was $430,300 and the average sales price was $514,000, lower than $440,300 and $530,800 respectively, a year ago.

Sales plunged in the Midwest by 17.2% to 77,000, the West by 9.4% to 183,000 and the South by 7.5% to 383,000 but rose in the Northeast by 6.7% to 32,000. 

 

U.S. Indexes & Yields 

The S&P 500 index decreased 1.03% to 4,293.08 and the Nasdaq Composite fell 1.1% to 13,126.05. 

The yield on 2-year Treasury notes hovered at 5.16%, 10-year Treasury notes inched higher to 4.55% and 30-year Treasury bonds edged up to 4.68%. 

Crude oil increased $0.33 to $90.02 a barrel and natural gas prices declined 1 cent to $2.64 a thermal unit. 

The dollar index edged higher to 106.12, the level last seen in November 2022 and extended gains from the low of 99.85 on July 13, 2023.  

 

U.S. Stock Movers 

Thor industries rose 1.% to $95.68 after the company reported revenue declined 28.4% in its latest quarter of $2.74 billion. 

Net income in the quarter declined to $90.3 million from $280.9 million and diluted earnings per share fell to $1.68 from $5.15 a year ago.  

The company also forecasted revenue to decline in the next fiscal year to between $10.5 billion and $11.0 billion from $11.2 billion in fiscal 2023. 

United Natural Foods Inc dropped 23% to $14.44 after the company reported weaker-than-expected sales in its latest quarter and forecasted additional weakness in sales and operating earnings in the current quarter.