The Dow Jones fell in today’s session, losing some of last week’s big gains, as U.S. Treasury yields rose sharply and investors awaited new third-quarter corporate results.
THE S&P 500 fell 0.18% to close at 5,853.98 points, while the Dow Jones lost 344.31 points, or 0.8% of its value, at 42,931.60 points. On the contrary, the Nasdaq which went against the grain and strengthened by 0.27%, closing at 18,540.01 units.
Stocks in the consumer goods sector were among the biggest losers, amid concerns about rising bond yields. Shares of Target and Builders FirstSource fell 3.8% and 5.2%, respectively, while Lennar fell 4.4%.
The yield on the 10-year U.S. Treasury note rose 12 basis points to 4.17%.
“Bond yields continue to rise, which means investors now think the Fed will slow the pace of rate cuts because the economy remains resilient. Therefore, the Fed may have a harder time getting inflation to its 2% target next year,” said Sam Stovall, strategist at CFRA.
Meanwhile, third-quarter corporate earnings announcements continue – this week, about a fifth of companies listed in the S&P 500 are reporting.
Of the 14% of S&P 500 companies that have already released third-quarter results, 79% reported better-than-expected revenue and profits, according to data from FactSet. However, analysts significantly lowered their earnings expectations for the third quarter.
“I don’t think we’re at the beginning of a recession in corporate profits or anything like that, but the bar has been lowered,” adds Stovall.
But while investors are optimistic that stocks still have room to rise, they are concerned about high valuations, especially ahead of the US presidential election and in a context of geopolitical risks, as these conditions could bring intense volatility.