The Federal Reserve recently announced its latest borrowing costs increase, resulting in its benchmark policy attaining the highest level since 2007. But the new interest rate hike marked the smallest in a year. The Fed chairman explained that they would likely pause interest rate hikes. The end of the rate hiking campaign will mark a positive sign for assets such as tech stocks.
In any case, the US stock market fell Monday as investors became increasingly wary of the rising bond yields. The tech-heavy Nasdaq Composite led this downward trend. Meanwhile, the Dow Jones Industrial Average dropped by 0.1%, or 34.99 points, to close at 33,891.02. The 30-stock market index recorded another drop of about 240 points during the morning session. Overall, the Nasdaq Composite recorded the most significant drop of about 1% to close at 11,887.45.
The S&P 500 dropped by 0.61% to end at 4,111.08. In general, stockholders collected profits since the stock market recorded a hot start this year. The Nasdaq Composite increased in the previous five weeks, while the S&P 500 advanced by 7% in 2023. The 2-year yield rose by about 18 basis points to 4.48% while the Treasury bond yield also increased. The benchmark 10-year yield rose by about 11 basis points to 3.64%. Besides, the dollar index advanced by nearly 0.76% on Monday, contributing further to the stock’s decline.
In the meantime, Apple shares declined by 1.8%, pressuring the Dow as investors remain wary about higher rates on most tech stocks. Defensive stocks such as Coca-Cola and Merck advanced while retailers like Nike and Target declined. Monday marked the beginning of a week with massive earnings. The Children’s Place apparel retailer dropped by 4% as it lowered its outlook in the fourth quarter. Likewise, Tyson Foods dropped by 4.6% due to recording a weaker-than-expected income report.
Experts believe the S&P 500 companies’ profits will increase to about 2.7% during the fourth quarter since the earnings season is halfway complete. Most importantly, investors are following up on remarks from the Federal Reserve Chairman during the Economic Club of Washington. Previous comments from the chairman regarding disinflation caused stock investors to overlook another borrowing cost rise from the central bank and bid shares higher.
Goldman Sachs is doubtful of expectations on Wall Street’s recession and thinks there is no chance to evade it. Generally, the firm lowered its recession possibility in the coming 12 months from 35% to less than 25%. This prediction is way below the 65% that the recent Wall Street Journal indicates. The Gross Domestic Product will likely rise to 0.4% during the first quarter but accelerate further through 2023.
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US Stocks Stabilize After Inflation Data Raises Interest Rate Fears
UK Economy’s Latest Headache is Rising Business Borrowing Costs
