Treasury yields rise again, spooking the stock market

Just a day after remarks from Federal Reserve Chairman Jerome Powell appeased the market, all bets are off once more.
All three stock indexes opened decrease. More than an hour after the market opened the Dow (INDU) crept up 0.4%, or 115 factors, the day after the index closed above the 33,000 point mark Wednesday for the first time in historical past. Meanwhile, the different two benchmarks stay deep in the purple: The S&P 500 (SPX) was down 0.5%, and the extra tech-focused Nasdaq Composite (COMP) fell 1.5%. The 10-year Treasury yield reached a brand new 13-month excessive, climbing 0.1% to 1.74% round the time the market opened.

Powell did not seem involved about the latest ascent in bond yields throughout Wednesday’s financial coverage replace. He additionally stated the central financial institution is not prepared to drag the plug on its bond-buying program, thereby avoiding a scenario like the 2013 “taper tantrum” that occurred when buyers acquired scared about the finish of the final easy-money period.

Powell tried to assuage worries about rising inflation. Investors are involved that the reopening of the financial system and pent up shopper demand will result in a soar in inflation over the summer season that may power the Fed to lift rates of interest.

The Fed’s consensus outlook confirmed that solely 4 officers expect an rate of interest enhance in 2022, with most officers forecasting a hike in 2023. In his remarks, Powell reiterated that any rising costs over the summer season will likely be momentary.

Although this helped the market Wednesday, “inflation fears have crept in again,” stated BMO economist Priscilla Thiagamoorthy, explaining the yield transfer in a notice to shoppers.

“After yesterday’s [Fed] rate decision and [the] Powell press conference, investors appeared to be comfortable with the Fed’s plan going forward,” stated Paul Hickey, of Bespoke Investment Group. “After sleeping on it, though, investors are having second thoughts.”

Economic information additionally did not assist issues, with weekly jobless claims unexpectedly rising.

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