Wall Street’s main indexes were set to open lower on Monday as the yield on the benchmark U.S. 10-year Treasury note hit the crucial 5% mark, while investors awaited earnings from the world’s largest technology companies and key economic data.
The yield on the 10-year note touched the July 2007 milestone that it briefly attempted to scale last week. It was last at 4.9844%. Yields on the 2-year and 30-year notes also rose.
“This continued (economic) strength has cast doubt over whether interest rates really have peaked, even if the Fed does still look very likely to leave rates unchanged,” said Rupert Thompson, chief economist at Kingswood Group.
“Upward pressure on yields has also comes from increased concern over the large amount of government debt needing to be absorbed by the market.”
Focus will remain on the largely positive earnings season. Four of the ‘Magnificent Seven’, which have helped power the S&P 500 higher in 2023 while the other indexes lagged, report later this week.
Wall St falls on elevated Treasury yields, Middle East worries
Of the 86 companies in the S&P 500 that have reported earnings so far in the third quarter, 78% have been above analysts’ estimates, according to the LSEG data.
Chipmaker Intel, oil major Exxon Mobil, General Motors are among other major companies set to report results this week.
Meanwhile, Israel bombarded Gaza and also struck southern Lebanon overnight, in signs that the conflict was spreading.
The rising tensions, along with surging bond yields on expectations of higher rates, pulled Wall Street lower last week. The S&P 500 fell 1.26% while the Cboe Volatility index closed at its highest since March 24.
U.S. GDP print, expected on Thursday, will be closely monitored amid expectations that the economy expanded at a robust 4.2% in the third quarter, which might warrant tighter monetary policy.
Federal Reserve Chair Jerome Powell will give brief introductory remarks at an event on Wednesday. He will refrain from speaking on monetary policy since the blackout period for the Oct. 31-Nov. 1 Federal Open Market Committee meeting kicked in over the weekend.
Investors will also track the personal consumption expenditure (PCE) price index - the Fed’s preferred inflation gauge - for September at the end of this week.
At 8:31 a.m. ET, Dow e-minis were down 134 points, or 0.4%, S&P 500 e-minis were down 14.75 points, or 0.35%, and Nasdaq 100 e-minis were down 56 points, or 0.38%.
Salesforce dipped 1.8% in premarket trading as Piper Sandler downgraded to “neutral” from “overweight”, while pharmacy chain operator Walgreens Boots Alliance added 3.4% after J.P. Morgan upgraded it to “overweight”.
Chevron fell 2.4% after the energy major said it would buy smaller rival Hess Corp in a $53 billion all-stock deal. Hess was nearly flat.
Shares of Coinbase, Riot Platforms, Marathon Digital and Bitfarms were up between 2.4% and 2.9% as Bitcoin hit over a three-month high.
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