New York, Oct. 23 (BNA): Wall Street is sinking Monday as pressure from the bond market continues to build.
The S&P 500 was 0.7% lower in early trading, coming off its worst week in a month. The Dow Jones Industrial Average was down 181 points, or 0.5%, as of 9:40 a.m. Eastern time, and the Nasdaq composite was 0.9% lower.
Rapidly rising yields in the bond market have been knocking stock prices lower since the summer, and Treasury yields were climbing again. The yield on the 10-year Treasury rose to 4.96% from 4.91% late Friday. Earlier in the morning, it briefly topped 5.02% to touch its highest level since 2007.
As the centerpiece of the global financial system, Treasury yields help dictate how much investors pay for everything from stocks to corporate bonds to cryptocurrencies. Higher yields also make it more expensive for nearly everyone to borrow money, which puts the brakes on economic growth.
“If bond yields continue to rise relentlessly, something will eventually break,” said Seema Shah, chief global strategist of Principal Asset Management. They already helped cause three high-profile failures of U.S. banks earlier this year.
The 10-year Treasury yield has been climbing for a few reasons, and it’s been catching up to the overnight interest rate that the Federal Reserve has hiked furiously since early last year to try to get inflation under control. The Fed has already pulled its main rate above 5.25%, its highest level since 2001, and has pledged to keep rates high until it’s sure inflation is heading back down to its target.
Even though inflation has come down since its peak last year, upward pressures remain on inflation. One threat has been the price of oil, which has been shooting up and down in recent weeks amid worries about the latest Middle Eastern conflict.
A barrel of benchmark U.S. crude oil fell 1.1% to $87.15 to take some pressure off inflation. Brent crude, the international standard, fell 0.7% to $91.50.
Oil prices has been volatile since rising rapidly through the summer on worries that fighting could lead to disruptions in supplies from Iran or other big oil-producing countries.
Energy giant Chevron is putting some of its strength to work by buying rival Hess. Chevron said it’s swallowing up Hess in an all-stock deal valued at $53 billion. Chevron fell 3%, and Hess rose 0.7%.
It’s the second huge deal in the oil-and-gas industry in as many weeks. Exxon Mobil said earlier this month that it’s buying Pioneer Natural Resources in an all-stock deal valued at $59.5 billion.
Apple was the heaviest weight on the S&P 500 and fell 1.6% following reports that Foxconn Technology, its Taiwan-based supplier, was recently subjected to searches by Chinese tax authorities.
Stock markets were also weak around the world, with London’s FTSE 100 down 0.5% and stocks in Shanghai down 1.5%.
Tokyo’s Nikkei 225 index lost 0.9% even though Japanese Prime Minister Fumio Kishida announcement of “bold” plans, including an income tax cut for households hit by inflation and tax breaks for companies, to galvanize lackluster growth in the world’s No. 3 economy.
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