Wall Street's bond market exhibits weakness
Following yesterday's stasis, Wall Street is witnessing a decline in the stock market. One factor contributing to this: the escalating interest rates in the bond market. Meanwhile, corporations' earnings reports are causing fluctuations. For instance, McDonald's is experiencing a different kind of movement.
Recent surges in bond yields and mixed corporate news are impacting Wall Street negatively. The Dow Jones Industrial Average, home to blue-chip stocks, closed Wednesday down about 1% at 42,514 points. The Nasdaq, a tech-heavy index, dropped 1.6% to 18,276 points. The S&P 500, a broad-based index, lost 0.9% to 5,797 points.
The yield on the 10-year U.S. Treasury bond has risen from approximately 3.620% to 4.236% over the past five weeks. Robert Pavlik, a portfolio manager at Dakota Wealth, commented, "If 10-year Treasury bonds are yielding 4.25%, it slows down the stock market rally. Everything becomes slower, and people get a bit anxious." Higher yields make Treasury bonds more appealing compared to stocks, as they are considered a safer investment class.
Wariness towards the U.S. stock market was also prompted by an influx of news from prominent corporations. For example, McDonald's stock dived over 5% due to an E. coli outbreak.
Qualcomm too faced pressure, with its shares dropping nearly 4%. According to an insider source, Arm, a chip designer, terminated its licensing agreement with Qualcomm due to a licensing dispute.
Investors were disappointed by Coca-Cola's latest forecast as well. Coca-Cola aims for organic revenue growth of approximately 10% for the full year, but instead of the previous 9-10%, experts remained cautious. "The guidance is simply being maintained," said Christian Greiner, a portfolio manager at investment manager F/m.
Texas Instruments, despite missing earnings expectations, saw a rise in its shares by more than 4%. "Texas Instruments' statement that it's not getting worse could be sufficient to sway slightly positive investors," explained Bernstein analyst Sara Russo.
Pressure on Tesla and Bitcoin
Two major market players, Tesla and IBM, released their results post U.S. market hours. Tesla reported a higher-than-expected profit, causing its shares to surge up to 9% during after-hours trading. IBM, however, disappointed with its revenue, leading to a 6% drop in its shares during after-hours trading.
Fortuitously strong increases in U.S. oil inventories put pressure on oil prices. North Sea Brent crude and U.S. WTI crude both declined by about 1% to $75.20 and $71.01 per barrel (159 liters) respectively. U.S. oil inventories increased by 1.64 million barrels last week, surpassing analysts' expectations of a 300,000-barrel increase.
Bitcoin suffered another decline. The cryptocurrency fell by 1.6 percent to $66,385, marking the third consecutive day of declines. Speculations about Donald Trump's victory in the U.S. presidential election had driven the price up to a high of $68,753. However, experts were skeptical. "Despite the tight race, uncertainty about the formation of the next government remains high," said Timo Emden of Emden Research. Moreover, even if Trump wins, "there are legitimate doubts about whether he will actually implement his promised policies. Investors seem to be gradually removing their rose-tinted glasses."
For more information on today's market activity, click here.
The Dow Jones Industrial Average, which houses prominent blue-chip companies, experienced a 1% decrease on Wednesday, influenced by rising bond yields and market uncertainties. Additionally, the declining performance of several corporations, such as McDonald's and IBM, further negatively impacted Wall Street.
