Rising Treasury Yields Ahead of Powell Comments Cast Long Shadow Over Stock Markets

Barry Adams
19 Oct, 2023
New York City

Market indexes on Wall Street lacked direction and the popular averages are likely to extend weekly losses after bond yields approached 16-year highs. 

The S&P 500 index and the Nasdaq Composite index lacked directions and for the week are down 0.3% and 0.7% respectively as investors reviewed latest earnings results. 

The yield on 10-year Treasury notes edged higher ahead of comments from the Federal Reserve Chairman Jerome Powell and investors are factoring another rate hike at the end of the next policy meeting ending on November 1.

Investors reacted positively after Netflix reported a surge in net paid subscribers in the third quarter and forecasted revenue growth to sustain in the fourth quarter. 

Tesla faced headwinds after the electric vehicle maker reported a sharp drop in quarterly  earnings and a decline in gross margin after the company offered larger-than-usual discounts. 

On the economic front, the initial jobless claims declined 14,000 to 198,000 for the week ending on October 14, the U.S. Department of Labor reported Thursday. 

The weekly jobless claims dropped to the lowest level since January, confirming the tight labor market conditions. 

 

U.S. Indexes & Yields 

The S&P 500 index increased 0.1% to 4,318.15 and the Nasdaq Composite rose 0.2% to 13,332.71. 

The yield on 2-year Treasury notes increased to 5.21%, 10-year Treasury notes inched higher to 4.94% and 30-year Treasury bonds edged up to 5.02%. 

Crude oil decreased $0.89 to $87.46 a barrel and natural gas prices fell 2 cents to $3.07 a thermal unit. 

The dollar index edged higher to 106.29, the level last seen in November 2022 and extended gains from the low of 99.85 on July 13, 2023.  

 

U.S. Stock Movers 

Tesla  Inc decreased 7.5% to $224.30 after the electric vehicle maker reported a sharp decline in its quarterly profits and weaker margins. 

Revenue in the third quarter increased 9% to $23.4 billion from $21.5 billion and net income attributable to shareholders plunged 44% to $1.9 billion from $3.3 billion and diluted earnings per share dropped to 53 cents from 95 cents a year ago. 

Moreover, free cash flow plunged to $848 million from $3.3 billion as the company continued its investment in Artificial Intelligence based products, autonomous vehicles and its much delayed Cybertruck vehicle. 

Netflix Inc soared 15% to $397.60 after the video streaming platform operator reported sharply higher revenue and earnings growth and added that the company is likely to exceed its annual free cash flow estimate.   

Revenue in the third quarter increased 7.8% to $8.5 billion from $7.9 billion and net income surged to $1.7 billion from $1.4 billion and diluted earnings per share advanced to $3.73 from $3.10 a year ago. 

Global streaming paid members increased by 8.76 million to 247.15 million, an increase of 10.8% from a year ago.

Free cash flow soared to $1.9 billion from $472 million a year earlier. 

The streaming platform estimated revenue in the fourth quarter to jump 11% to $8.7 billion and paid net additions to match the increase in the third quarter.