April 17, 2024

US Stocks Shed Losses as Treasury Yields Drop

Stocks in the US fell again on Wednesday. It caught up with the rally Wall Street has enjoyed for the past three days. The market slid after tech firms reported poor earnings for the last quarter.

Stocks Take Another Hit

The Nasdaq 100 index and the S & P 500 index shed losses. It was Microsoft Corp. shares that dropped most of all since March 2020. This came after the company’s earnings showed how the Fed. Reserve policy affected the economy.

Alphabet Inc., Google’s parent company, also dropped some points after its indecisive earnings. Amazon, Apple, and Meta are part of the top companies that still have to report this week.

Treasury bond yields also slid on Wednesday. The ten-year rates fell around 4.02% after reports showed that the US commodity trade deficit broadened. 

New US home sales for September equally fell. It was another signal that the economy was beginning to feel the effects of the Fed’s rate policy. A US Dollar gauge fell for the second day in a row to the deepest level in three weeks.

The stock market had been carried in recent days largely by solid earnings. And also by the market’s speculations that the Feds might reduce the pace of their interest rate hike. 

Fed Hawkish Policy Felt

Almost one-quarter of all S & P 500 companies have published their Q3 earnings. And over two-thirds of those published surpassed analysts’ speculations despite the setback seen by big tech companies. Investors are, however, concerned that low production might affect corporate gains in the months ahead.

Verdence Capital Advisors’ Megan Horneman said this has been a difficult year for equities. Investors are trying, at the same time, to assess the effects of easy access to funds for valuations. Furthermore, the high inflation has made it hard for companies to absorb.

Now, the market is seeing the negative effects of margins falling from high records. Strategists at Goldman Sachs said conditions are not visible for a trough in the US stock markets. This is because the asset class does not show the recent increases in real yields and recession odds.

In the event of a harsh economic situation, Goldman Sachs expects the S&P 500 index to drop heavily. It expects precisely a 25% drop from the Tuesday closing point.  

Meanwhile, the Pound held a bit high. The government has delayed the widely expected policy statement till November. The Pound rallied after PM Sunak formed a new cabinet.

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