Market Averages Sink as 10-year Treasury Yield Crosses 5%

Barry Adams
20 Oct, 2023
New York City

Stocks faced headwinds after Treasury yields advanced and crude oil traded higher for the second week in a row on the worries of the Israel-Hamas war spreading to neighboring states.

The S&P 500 index and the Nasdaq Composite declined more than 0.8%, and tech stocks led the decliners after the yield on benchmark 10-year Treasury notes crossed 5%.

The benchmark bond yield is jumping above 5% for the first time since 2007.

On Thursday, Federal Reserve Chairman Jerome Powell stressed at a gathering in New York that rates are not restrictive enough and interest rates may have to stay higher for longer to cool inflation to the 2% target rate.

The yield on the 10-year Treasury advanced after Powell's comments and continued to rise in Friday's trading.

 

Israel-Hamas Conflict Worries Lift Crude Oil Higher

The prospect of the Israel-Hamas war spreading to neighboring countries kept investors on the sidelines after protests erupted in Iran, Iraq, Lebanon, Egypt, and Turkey.

Moreover, a U.S. Navy ship in the Red Sea intercepted missiles and drones fired by Iran-backed Huthi rebels in Yemen.

The wider conflict in the Middle East could disrupt crude oil supplies in the region and put additional pressure on prices.

In addition, the U.S. is planning to buy six million barrels of crude oil to replenish its strategic oil reserves with deliveries in December and January.

To facilitate the purchase, the U.S. eased sanctions on the Venezuelan oil sector as the oil market is struggling with production cuts extended till the end of 2023 by the two largest oil exporters, Russia and Saudi Arabia.

 

U.S. indexes and Yields 

The S&P 500 index decreased 0.9% to 4,237.43, and the Nasdaq Composite fell 1.3% to 13,002.46.

The yield on 2-year Treasury notes decreased to 5.08%, 10-year Treasury notes inched lower to 4.91%, and 30-year Treasury bonds edged up to 5.08%.

Crude oil decreased $1.09 to $89.48 a barrel, and natural gas prices fell 4 cents to $2.90 a thermal unit.

The dollar index edged higher to 106.19, the level last seen in November 2022, and extended gains from the low of 99.85 on July 13, 2023.

 

U.S. Stock Movers 

SolarEdge Technologies Inc plunged 30.8% to $79.31 after the company lowered its third-quarter revenue outlook, citing cancellations and deferrals in Europe.

The company lowered its revenue range between $720 million and $730 million from the previous estimate between $880 million and $920 million.

Enphase Energy Inc. dropped 13.5% to $100.34 and Frist Solar declined 0.2% to $151.75, after SolarEdge revised its sales outlook.

Intuitive Surgical, Inc declined 4.5% to $260.95 after the robotic surgery device maker reported mixed quarterly results.

The company said total revenue increased 12% to $1.74 billion from $1.55 billion, net income soared to $415.7 million from $324.0, and diluted earnings per share advanced to $1.16 to 90 cents a year ago.

CSX Corp added 2.1% to $31.18 after the railroad company reported mixed quarterly results. 

Revenue in the third quarter declined 8% to $3.6 billion from $3.9 billion, net income plunged 24% to $846 million from $1.1 billion, and diluted earnings per share decreased to 42 cents from 52 cents a year ago.

American Express Company declined 3.2% to $144.92 despite the financial services company reporting positive quarterly results and demand for premium membership cards.

Total revenue net of interest expenses increased 13% to $15.4 billion from $13.6 billion, net income advanced 30% to $2.5 billion from $1.9 billion, and diluted earnings per share advanced to $3.30 from $2.47 a year ago.

Regions Financial Corp plunged 15.5% to $14.0 after the regional bank reported weaker-than-expected quarterly results and also forecasted a decline in net interest income in the fourth quarter.

Net interest income in the third quarter increased by 2.3% to $1.29 billion from $1.26 billion, net income advanced to $490 million from $429 million, and diluted earnings per share rose to 49 cents from 43 cents a year ago.

Net interest margin in the quarter rose to 3.73% from 3.53% a year ago, and net interest income is expected to decline 5% in the fourth quarter and fall 11% in 2023 from 2022.