U.S. Stocks Offset Early Rally As Treasury Yields Continue To Surge


Stocks showed a strong move to the upside early in the session on Thursday but have come under pressure over the course of the trading day. The major averages have pulled back well off their highs of the session and into negative territory.

After surging by nearly 400 points in early trading, the Dow is currently down 23.14 points or 0.1 percent at 30,400.67. The Nasdaq is also down 21.89 points or 0.2 percent at 10,658.62 and the S&P 500 is down 17.12 points or 0.5 percent at 3,678.04.

Stocks initially benefited from another batch of upbeat earnings news from big-name companies like IBM Corp. (IBM) and AT&T (T).

IBM reported better than expected third quarter results and raised its full-year revenue guidance, while AT&T also reported third quarter results that exceeded analyst estimates on both the top and bottom lines.

Buying interest has waned over the course of the session, however, with a continued surge in treasury yields contributing to the subsequent pullback by the markets.

The yield on the benchmark ten-year note is extending the sharp increase seen on Wednesday, reaching its highest levels in over fourteen years.

Concerns about the outlook for interest rates continue to drive yields higher, with Philadelphia Federal Reserve President Patrick Harker saying today that he expects the Fed to continue raising rates “for a while.”

“Given our frankly disappointing lack of progress on curtailing inflation, I expect we will be well above 4 percent by the end of the year,” Harker said in prepared remarks before the Greater Vineland Chamber of Commerce in New Jersey.

Harker predicted the Fed would eventually stop hiking rates sometime next year but said the central bank should keep rates at a restrictive level to allow the higher cost of capital to work its way through the economy.

Sector News

Interest rate-sensitive utilities stocks have shown a significant move to the downside on the day, dragging the Dow Jones Utility Average down by 2.0 percent.

Considerable weakness has also emerged among transportation stocks, as reflected by the 1.8 percent drop by the Dow Jones Transportation Average.

Shares of American Airlines (AAL) have come under pressure even though the airline reported third quarter results that beat analyst estimates on both the top and bottom lines.

Tobacco, banking and housing stocks have also moved notably lower over the course of the session, while some strength remains visible among steel and computer hardware stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index slumped by 0.9 percent, while China’s Shanghai Composite Index slipped by 0.3 percent.

Meanwhile, the major European markets moved to the upside over the course of the session. While the French CAC 40 Index advanced by 0.8 percent, the U.K.’s FTSE 100 Index and the German DAX Index rose by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries are extending the steep drop seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 8 basis points at 4.207 percent.

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