Wall St drops as Treasury yields surge, Powell speaks
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[October 20, 2023] By
Caroline Valetkevitch
NEW YORK (Reuters) - U.S. stocks ended solidly lower on Thursday, with
shares of Tesla falling after its results and Treasury yields surging as
Federal Reserve Chair Jerome Powell spoke about monetary policy and
investors worried whether interest rates would stay higher for longer.
Tesla shares dropped a day after the carmaker missed Wall Street
expectations on third-quarter gross margin, profit and revenue, and its
CEO Elon Musk said he was concerned about high interest rates affecting
demand.
Treasury yields rose further and the benchmark 10-year note yield was at
a 16-year high of almost 5%.
"The 10-year looks like it's establishing a new higher trend, which ...
is putting pressure on equities, at least in the short term," said
Oliver Pursche, senior vice president, advisor for Wealthspire Advisors
in Westport, Connecticut.
"Markets were hoping that Jay Powell would indicate that the Fed is
going to pause in its interest rate hikes, and he effectively hinted at
the idea that they're going to have to raise again if they continue to
have elevated concerns over inflation."
Powell said at the Economic Club in New York that U.S. central bankers
were moving carefully on policy after aggressive rate hikes last year,
but he added that the economy's strength and continued tight labor
markets could warrant further rate hikes.
The rate-sensitive real estate sector dropped 2.4% and was the day's
worst-performing S&P 500 sector.
The Dow Jones Industrial Average fell 250.91 points, or 0.75%, to
33,414.17, the S&P 500 lost 36.6 points, or 0.85%, to 4,278 and the
Nasdaq Composite dropped 128.13 points, or 0.96%, to 13,186.18.
The Cboe Volatility index jumped to its highest close since March.
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Traders work on the floor of the New York Stock Exchange (NYSE) in
New York City, U.S., August 15, 2023. REUTERS/Brendan McDermid
Data this week has pointed to strong consumer demand and a tight
labor market. A U.S. Labor Department report on Thursday showed the
number of Americans filing new claims for unemployment benefits fell
to a nine-month low last week.
The labor market is showing strength even though the central bank
has raised its benchmark overnight interest rate by 525 basis points
since March 2022.
Also in earnings, Netflix Inc shares jumped 16.1% after the world's
No. 1 streaming company by subscriber count said it was raising
prices for some of its plans in the United States, Britain and
France after adding 9 million users in the third quarter.
Shares of American Airlines rose 0.8% after the company posted
upbeat quarterly results. On Wednesday, airline stocks fell sharply
after United Airlines forecast current-quarter profit below analyst
expectations.
Volume on U.S. exchanges was 11.82 billion shares, compared with the
10.50 billion average for the full session over the last 20 trading
days.
Declining issues outnumbered advancing ones on the NYSE by a
3.96-to-1 ratio; on Nasdaq, a 2.96-to-1 ratio favored decliners.
The S&P 500 posted 2 new 52-week highs and 37 new lows; the Nasdaq
Composite recorded 15 new highs and 370 new lows.
(Reporting by Caroline Valetkevitch; additional reporting by Shubham
Batra and Shashwat Chauhan in Bengaluru; Editing by Dhanya Ann
Thoppil, Saumyadeb Chakrabarty, Vinay Dwivedi and David Gregorio)
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