U.S. Treasury Selloff Spreads to Longer Dated Maturities, S&P 500 Drops

Barry Adams
03 Oct, 2023
New York City

Rising U.S. Treasury yields added more downward pressure on market indexes and investors stayed cautious ahead of earnings season kickoff. 

The S&P 500 index and the Nasdaq Composite trended lower after the yield on 10-year Treasury notes jumped to a high not seen since August 2007. 

After months of hoping that interest rates are nearing peak rates, investors abandoned the expectations of the Federal Reserve lowering rates this year. 

Instead, the Federal Reserve suggested one more rate  hike at the end of the last meeting two weeks ago and also signaled that higher rates are likely to stay longer well into 2024. 

In the last two weeks, the yields on 2-year and 5-year Treasury notes edged higher and now the yields are rising on 10-year, 20-year and 30-year Treasury bonds. 

Stock market clearly noticed the rising bond yields, as higher bond yields attract more capital away from stocks and present value of future earnings of tech and high tech stocks lose value because of higher interest rates. 

Moreover, surging crude oil prices in the last two months have reignited fears of higher inflation after months of decline in overall inflation. 

 

U.S. Indexes & Yields 

The S&P 500 index edged up 0.006% to 4,288.39 and the Nasdaq Composite rose 0.7% to 13,307.77. 

The yield on 2-year Treasury notes increased to 5.11%, 10-year Treasury notes inched lower to 4.72% and 30-year Treasury bonds edged down to 4.85%. 

Crude oil increased $0.19 to $89.01 a barrel and natural gas prices increased 4 cents to $2.88 a thermal unit. 

The dollar index edged higher to 107.19, the level last seen in November 2022 and extended gains from the low of 99.85 on July 13, 2023.  

 

U.S. Stock Movers 

Macy's Inc declined 0.5% to $11.49 after the department store operator said it plans to open 30 smaller stores in strip malls over the next two years. 

The retailer hopes that smaller stores with limited merchandise and modern look will appeal to younger customers who do not frequent large malls. 

Point Biopharma Inc soared 84% to $12.23 after the company agreed to be acquired by Eli Lilly for $12.50 a share in cash or $1.4 billion. 

Eli Lilly & Company decreased 1.1% to $532.39. 

McCormick & Company Inc dropped 7.8% to $68.86 after the spice maker reported quarterly results. 

Revenue in the third quarter ending in August increased 6% to $1.7 billion from $1.6 billion and net income dropped to $170 million from $222.9 million and diluted earnings per share dropped to 63 cents from 83 cents a year ago. 

The company reiterated its sales and operating earnings outlook for 2023.

Revenue in 2023 is expected to increase between 5% and 7%, primarily driven by price increases and operating income is expected to increase between 11% and 13% from $864 million and diluted earnings per share between $2.46 and $2.51 compared to $2.52 in 2022.