Traders work on the floor of the New York Stock Exchange (NYSE) on August 26, 2022 in New York.
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Stocks fell on Friday as a rise in 10-year Treasury yields sparked broader concerns about the state of the economy.
The S&P 500 lost 0.6% and kept pace with its first decline in three weeks, while the Nasdaq Composite fell 0.8%. The Dow Jones Industrial Average fell 118 points, or 0.4%, by American Express after a mixed earnings report.
The benchmark 10-year Treasury yield topped 5% on Thursday for the first time in 16 years, which could impact the economy by raising rates on mortgages, credit cards, auto loans and more. Not to mention, it offers investors an attractive alternative to stocks.
The 10-year bond yield hit 5.001% on Thursday around 5 p.m. ETT, marking the first time since July 2007 that it was above that level. The last quote was 4.912%.
“The stock market is watching the bond market and doesn’t like what it sees,” said David Donabedian, chief investment officer at CIBC Private Wealth Management. “Yields are rising, even with relatively good inflation news. This is the main reason for the stock market weakness.”
The 30-year U.S. Treasury yield also hit a high last seen in July 2007. Meanwhile, the 30-year fixed mortgage rate hit 8% this week, a level not seen since 2000.
Regional banks fell as higher rates raised concerns about the sector’s exposure to falling Treasury values. Financial Regions lead the decline after a weak earnings report that fell by more than 11%. The SPDR S&P Regional Banking ETF (KRE) fell almost 3%.
American Express shares fell 3.5%. The company’s earnings per share were better than expected, but revenue was roughly in line with estimates. Meanwhile, non-interest income missed StreetAccount consensus expectations.
The largest declines also included shares of photovoltaic companies. The move came after SolarEdge lowered its third-quarter revenue guidance, sending the company’s stock down 30%.
During the week, concerns about higher interest rates weighed on the market. The S&P 500 index fell 1.7% for the week, while the Dow lost 1.1%. The Nasdaq is down 2.4%, marking its second straight week of losses.
Nvidia, a closely followed artificial intelligence company, had its worst week since September 2022, with a loss of almost 9%. The stock fell more than 1.5% in Friday’s session. It was one of many semi-stock companies that struggled this week after the U.S. Commerce Department announced plans to tighten restrictions on the sale of advanced artificial intelligence chips to China.
Tesla was on track to end the week more than 14% lower, which would be its worst week since December 2022. The electric vehicle maker, which reported earnings on Wednesday, missed Wall Street expectations on both lines for the first time since 2019 .
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