Make Kitco Your Homepage

Wall Street succumbs to soaring bond yields

Kitco News

(Reuters) - U.S. stocks fell broadly on Thursday, mirroring weakness in the global markets, as government bond yields surged to multi-year highs on robust U.S. economic data and optimistic views from the Federal Reserve.

Ten of the 11 major S&P sectors were lower, led by a 1 percent drop in the communication services sector .SPLRCL, where heavyweights such as Facebook (FB.O) fell 1.2 percent, and Alphabet (GOOGL.O) and Netflix (NFLX.O) slid 1.7 percent each.

Technology stocks .SPLRCT declined 1 percent and were the biggest drag on the markets. Apple (AAPL.O) fell 0.8 percent.

The yield on the benchmark 10-year note US10YT=RR hit a high of 3.232 percent, as strong economic data on Wednesday raised expectations that the non-farm payrolls report due out on Friday morning would come in stronger than anticipated. [US/]

Fed Chairman Jerome Powell said the economy can expand for “quite some time,” which also helped the yield curve steepen to its highest in two months.

That boosted bank stocks .SPXBK, which jumped 1.6 percent, outstripping the 1.3 percent rise in the financial sector .SPSY, which was the only gainer among the 11 major S&P sectors.

“Risks are growing with borrowing cost on the rise and fixed-income markets looking very attractive,” said Hussein Sayed, chief market strategist at FXTM.

“With valuations still elevated compared to historic levels, it requires an upbeat earnings season for stocks to maintain their bullish momentum.”

Despite the pullback, U.S. stocks are trading near record levels, raising concerns about valuations with the earnings season just around the corner.

At 9:59 a.m. EDT the Dow Jones Industrial Average .DJI was down 117.06 points, or 0.44 percent, at 26,711.33, the S&P 500 .SPX was down 11.40 points, or 0.39 percent, at 2,914.11 and the Nasdaq Composite .IXIC was down 64.17 points, or 0.80 percent, at 7,960.92.

“Yields are giving the markets a chance to take a breather at very high levels. I think we will have a defensive, bumpy session going into Friday’s unemployment data,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Among gainers, Constellation Brands (STZ.N) shares jumped 4.9 percent after the Corona beer maker raised its full-year profit forecast and topped Wall Street’s estimates for second-quarter sales and profit.

Eli Lilly (LLY.N) rose 5 percent after the company’s experimental diabetes drug showed promise in a mid-stage trial. Snap Inc (SNAP.N) fell 5.8 percent after two brokerages raised concerns over Snapchat’s declining user trends.

Declining issues outnumbered advancers for a 2.78-to-1 ratio on the NYSE and a 2.03-to-1 ratio on the Nasdaq.

The S&P index recorded 6 new 52-week highs and 11 new lows, while the Nasdaq recorded 13 new highs and 30 new lows.

Reporting by Medha Singh in Bengaluru; Editing by Anil D'Silva

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Precious Metal Charts

Follow Kitco News

Silver Chess Set