Stocks fall as US 30-year yield hits 2007 high: Markets wrap

(Bloomberg) — Stocks fell and Treasuries resumed declines as investors grew more concerned about the long-term effects of historically high borrowing costs.

Most read from Bloomberg

The yield on 30-year US bonds rose to the highest level since 2007, and interest rates on 10-year bonds rose for the second day. The sell-off extended across stock and commodity markets, with the European Stoxx 600 trading near a six-month low, and S&P 500 futures falling more than 0.5%. West Texas Intermediate crude futures fell below $89 per barrel, and the dollar index reached a 10-month high.

In pre-market trading in the US, HP Inc rose. After Bank of America analysts raised their ratings to buy the personal computer maker.

Wall Street strategists are warning about the impact of higher interest rates on stocks, with Goldman Sachs Group, Morgan Stanley and JPMorgan Chase & Co. saying there is a risk of further declines in the stock market. Currently, traders expect about a one in three chance of a rate hike in November.

“We did not expect such an increase in interest rates,” said Vincent Govins, global market strategist at JP Morgan Asset Management. “This is something that will at least slow or even reverse the progress of stock markets.”

Read more: Treasury sell-off fuels speculation that bond vigilantes are back

The sell-off in Treasuries this week came after US lawmakers managed to avoid a government shutdown, prompting traders to increase bets that the Federal Reserve may raise interest rates in November. Comments from two Fed policymakers reinforced that view, with Cleveland Fed President Loretta Mester saying Monday that interest rates will likely need to be raised again, and Governor Michelle Bowman urging multiple increases.

The story continues

In Tuesday’s session, bond proxies such as utilities were hit hard in Europe. Retail stocks fell after a warning from online retailer Boohoo Group Plc, which fell as much as 12%.

“The market is likely evenly split on whether or not central banks will need to continue raising interest rates, so the bond index is testing investors,” said Brian O’Reilly, head of market strategy at Mediolanum International Funds. “With 10-year yields of around 4.6%, the asset allocation decision to equities has become very difficult.”

A slew of data this week could determine whether Treasury yields will continue to rise. US job vacancy numbers are due later today, while crucial monthly payroll data will be released on Friday.

Main events this week:

• China has a week-long holiday

• Atlanta Fed President Rafael Bostic talks about the economic outlook and inflation, Tuesday

• August JOLTS report in the US, Tuesday

• Interest rate decision in New Zealand, Wednesday

• Eurozone Services and Composite PMI, Wednesday

• European Central Bank President Christine Lagarde delivers a welcoming speech at the conference on Wednesday

• US ISM Services Index, Wednesday

• French industrial production, Thursday

• Deputy Governor of the Bank of England, Ben Broadbent, and First Deputy Governor of the Riksbank, Anna Bryman, participate in a panel discussion on Thursday.

• US Trade, Initial Jobless Claims, Thursday

• San Francisco Federal Reserve Bank President Mary Daly speaks at the Economic Club of New York on Thursday

• German factory orders on Friday

• US Unemployment Rate, Nonfarm Payrolls Report, Friday

Some key movements in the markets:

Stores

• The Stoxx Europe 600 Index was down 0.8% as of 1:22pm London time

• S&P 500 futures fell 0.5%

• Nasdaq 100 futures fell 0.6%

• Dow Jones Industrial Average futures fell 0.4%

• MSCI Asia Pacific Stock Index fell 1.5%

• MSCI Emerging Markets Index fell 1.1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%.

• There was little change in the euro at $1.0476

• There was little change in the Japanese yen at 149.92 to the dollar

• There was little change in the yuan in external transactions at 7.3265 to the dollar

• There was little change in the pound sterling at $1.2075

Digital currencies

• Bitcoin fell 1.4% to $27,458.31

• Ethereum fell 0.8% to $1,652.88

Bonds

• The yield on 10-year Treasury bonds rose five basis points to 4.73%.

• The yield on 10-year German bonds rose two basis points to 2.95%.

• There was little change in the yield on British bonds for 10 years at 4.57%.

Goods

This story was produced with assistance from Bloomberg Automation.

–With assistance from Jason Scott and Tasya Sibahutar.

Most read from Bloomberg Businessweek

©2023 Bloomberg L.P