US Stock Indices Shows Split Behavior as 10-Year Treasury Yield Rises

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by Bhushan Akolkar · 3 min read
US Stock Indices Shows Split Behavior as 10-Year Treasury Yield Rises

On Monday, the surge in Treasury yield saw the financial stocks soaring high. However, the tech sector took a beating dragging Nasdaq down.

On Monday, September 27, the US stock indices continued to show a split behavior, and investors remain divided. The 10-year Treasury Yield topped close to 1.50% on Monday amid economic optimism and fears of inflation.

US Stock Indices Movements

The Dow Jones Industrial Average (INDEXDJX: .DJI) gained 0.2% while the S&P 500 (INDEXSP: .INX) was down by 0.3%. A strong correction in the tech stocks dragged the Nasdaq Composite down to 0.5%. 

Furthermore, a stronger-than-expected report of durable goods orders supported the recovery in economic trade. In a note to clients, Chris Senyek of Wolfe Research wrote:

“We believe that these [bond market] moves have provided the spark for another ‘Value Rip’ across equity markets. In our view, the direction of longer-term interest rates should remain the #1 driver of market returns, sector rotation & thematic performance in the weeks ahead”.

Stocks related to economic recovery registered a major bounceback. Shares of Boeing Co (NYSE: NA) jumped 1.3% while United Airlines added 0.6%. Similarly, shares of Carnival Corp surged by 3.7%.

The surge in the Treasury Yield also boosted financial stocks on Monday. Shares of JPMorgan Chase & Company (NYSE: JPM) and Goldman Sachs Group Inc (NYSE: GS) gained 2% each. At the same time, the entire KBW Bank Index gained 2.9%.

However, a much better performer was delivered by the energy sector. The WTI crude price continued to surge further this month reaching $75 per barrel. The natural gas prices were also on the rise on Monday with investors closely monitoring the concerns of energy shortage in Europe. Also, shares of Exxon Mobil (NYSE: XOM) and Occidental Petroleum were up in yesterday’s trading session.

Tech Stocks  React to Rising Yield

On Monday, September 27, the tech stocks reacted to rising yield. This sector usually reacts inversely to the yield fluctuations since increased debt costs hinder growth. Furthermore, increased rates can make their future cash flows look less valuable.

During Monday’s trading session, major tech stocks like Alphabet Inc (NASDAQ: GOOGL), Apple Inc (NASDAQ: AAPL) and Nvidia Corporation (NASDAQ: NVDA) headed to the south. All eyes are currently on the possibility of avoiding a government shutdown. To avoid this shutdown, the Congress needs to pass a new budget by the end of September.

The lawmakers also need to figure out a way to increase the debt ceiling in October. Any failure to do so can lead to the US defaulting on its debt for the first time. On the other hand, House Speaker Nancy Pelosi expects the $1-trillion bipartisan bill to pass this week. Tavis McCourt, institutional equity strategist at Raymond James said:

“DC will start garnering more attention in the coming weeks as the political calculus around passing infrastructure bills and the debt ceiling debate likely guarantees some market moving headlines”.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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