10-Year Treasury Yield Climbs to 5% (Stocks Tumble)

U.S. stocks concluded the Friday trading session on a bearish note.

This downturn coincided with the benchmark 10-year Treasury yield remaining just below the 5% mark, driven by recent statements from Federal Reserve Chair Jerome Powell.

The Dow Jones Industrial Average (^DJI) saw a decline of 0.9%, equivalent to a drop of 270 points, while the S&P 500 (^GSPC) registered a 1.3% loss.

The Nasdaq Composite (^IXIC), predominantly composed of tech-related stocks, experienced a decrease of approximately 1.5%. For the entire week, all three major indices recorded losses.

The negative trend in the stock market followed Powell’s indication that the Federal Reserve remains committed to maintaining a “higher for longer” stance on interest rates. This declaration prompted a surge in Treasury yields.

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The benchmark 10-year yield (^TNX) briefly breached the 5% threshold late on Thursday, a significant milestone not observed since July 2007.

“The underlying message is ‘don’t anticipate immediate intervention from the Fed,'” commented Greg Whiteley, a portfolio manager at DoubleLine, in conversation with Reuters. “This encourages investors to explore interest rates exceeding 5%.”

On Friday afternoon, the 10-year Treasury yield retreated from the pivotal 5% level, reverting to approximately 4.91%.

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This occurred as part of a broader recovery observed in fixed-income assets. Nevertheless, the bond market’s “pain trade” might have further implications, continuing to exert pressure on stocks despite weeks of turmoil.

Investors, who were hopeful that robust financial reports would alleviate the subdued market sentiment, have yet to find solace.

Additionally, concerns persist in the volatile markets regarding the risk of the Israel-Hamas conflict escalating into a broader Middle East confrontation.

This apprehension arose after Israel’s defense chief hinted at the possibility of a ground offensive in Gaza over the weekend.

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(Source: Yahoo Finance)

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