U.S. Market Rally Pauses and Treasury Yields Turn Higher After Powell Comments

Barry Adams
09 Nov, 2023
New York City

Benchmark indexes drifted into the negative zone, and the indexes are set to halt a near two-week rally.

Stocks struggled as bond yields turned higher after dropping for the second week, and investors turned cautious after several days of market advance.

Treasury yields perked up after comments from Federal Reserve Chairman Powell in a panel discussion today suggested that it is too early to conclude that the rate hike campaign is over.

Chairman Powell was speaking today at a panel hosted by the International Monetary Fund in Washington, D.C.

The S&P 500 index halted the eight-day rally, and the Nasdaq Composite paused nine-day gains as investors reassessed recent market gains and the global economic backdrop.

During the last two weeks, market participants bid up high-growth and tech stocks after the Federal Reserve held short-term rates for the second time in a row earlier this month.

The move also sparked speculation that policymakers will keep rates steady at the next policy meeting in December, supporting rate stability.

Investors wasted no time in bidding up stocks, and the Nasdaq Composite and the S&P 500 index soared more than 5% in the previous and extended gains this week.

Moreover, softer nonfarm payroll data last week also supported the Fed's case for stable rates and reviewed the cumulative effect of multiple rate hikes since March 2022.

On the economic front, initial jobless claims declined to 217,000 last week, down from the two-month high of 220,000 in the week before, reported the U.S. Department of Labor on Thursday.

In international news, China's consumer and producer prices continue to weaken, highlighting weak domestic demand and cautious consumers.

 

China Battles Deflationary Forces 

The Chinese economy is battling an uneven economic recovery after the end of COVID restrictions, and consumers are holding on to their cash because of the ongoing property market woes.

China's consumer price index declined 0.2% in October after a flat reading in September, the National Bureau of Statistics reported Thursday.

Food prices declined for the fourth month in a row and fell at the fastest pace in 25 months to 4%, but nonfood inflation was unchanged at 0.7%.

The producer price index accelerated the decline to 2.6% after a 2.5% decline in September, the statistical agency said in a separate report.

The measure of wholesale prices declined for the 13th month in a row.

Consumer goods prices fell at a faster pace, reflecting larger declines in food and durable goods prices.

 

U.S. indexes and Yields

The S&P 500 index decreased 0.4% to 4,366.69, and the Nasdaq Composite fell 0.3% to 13,614.25.

The yield on 2-year Treasury notes increased to 4.96%, 10-year Treasury notes inched higher to 4.60%, and 30-year Treasury bonds edged up to 4.78%.

Crude oil decreased $0.92 to $76.27 a barrel, and natural gas prices rose 2 cents to $3.07 a thermal unit.

Gold increased $14.04 to $1,963.86 an ounce after bond yields edged lower and the dollar weakened.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 105.52.

 

U.S. Stock Movers

Lyft declined 3.3% to $10.30 after the digital ride hailing company reported weaker-than-expected quarterly results and guided that weak bookings are expected to persist in the current quarter.

Disney jumped 4.3% to $88.12 after the theme park operator and media company reported better-than-expected quarterly results.

Disney also said it plans to expand its cost reduction plans.

Arm dropped 6.2% to $51.0 after the advanced semiconductor chip maker reported mixed quarterly results and offered a muted outlook for the current quarter.

MGM Resorts advanced 3% to $39.85 after the hotel and casino operator reported better-than-expected quarterly results and the company announced its stock repurchase plan.

 

European Markets Extends Weekly Gains

European market indexes extended the previous week's gains, and bond yields edged lower in choppy trading.

Benchmark indexes in London, Paris, and Frankfurt advanced between 0.3% and 0.6%, and investors snapped up real estate and banking sector stocks.

The CAC 40 index is set to extend weekly gains to the fifth week in a row and the DAX 30 index to the third week in a row.  

Investors are bidding up stocks in the hopes that central banks will pause interest rate hikes at the next meeting in December, supporting rate stability till the end of January.

The European Central Bank, the U.S. Federal Reserve Bank, the Bank of England, and the Bank of Japan held their short-term interest rates.

Market participants are hoping that the recent weak retail sales data is likely to support the central bank's case to pause rates as the Eurozone economy adjusts to multiple rate hikes over the last fifteen months. 

In listless trading, stocks lacked direction but managed to regain footing in the afternoon. The euro edged higher, and bond yields extended the recent decline to the second week.

 

Europe Indexes and Yields

The DAX index increased 0.8% to 15,352.54, the CAC-40 index rose 1.1% to 7,113.66, and the FTSE 100 index advanced 0.7% to 7,455.67.

The yield on 10-year German bonds increased to 2.65%, French bonds traded higher to 3.24%, the UK gilts edged up to 4.27%, and Italian bonds inched lower to 4.53%.

The euro rebounded to $1.068, the British pound at $1.22, and the U.S. dollar at 90.07 Swiss cents.

Brent crude increased $0.95 to $80.49 a barrel, and the Dutch TTF natural gas edged higher by €1.52 to €46.13 per MWh.

 

Europe Stock Movers

Arcelor Mittal SA declined 1.9% to €21.0 after the steel company reported lower revenue and earnings in the third quarter.

Airbus SE decreased 3.1% to €126.40 despite the aircraft maker posting a higher underlying third quarter profit and reiterating its annual delivery target financial outlook.

Flutter Entertainment plc dropped 8.5% to 12,500.0 pence after the online betting platform said it plans to delist its stock from the Irish Stock Exchange and list in the U.S.

AstraZeneca plc gained 2.8% to 10,458.0 pence after the drug company reported better-than-expected third-quarter results.

Taylor Wimpey plc increased 2.2% to 118.19 pence after the UK-based home builder reiterated its annual outlook.

Wizz Air Holdings PLC dropped 6.4% to 1,746.0 pence despite the budget airline estimating a narrower annual loss.

Henkel AG & Co. advanced 2.4% to €69.08 after the German consumer products maker lifted its annual estimate.

Merck KGaA jumped 4.9% to €155.25 after the German pharmaceutical company reported better-than-expected third-quarter results.