Nasdaq 100 Dips 1% Amid Rising Treasury Yields
The US stock market experienced a decline as Treasury yields surged, prompting concerns among investors. The market sentiment was impacted by the announcement of a $103 billion debt sale by the Treasury, signaling further rising issuance. Additionally, the upbeat ADP jobs report showing a surge of 324,000 jobs added by American companies in July led to a rise in bond yields.
Technology stocks, particularly the Nasdaq 100, bore the brunt of the losses, sliding over 1%, despite a solid earnings reportc from Advanced Micro Devices Inc. (AMD). The benchmark 10-year yields reached their highest level since November, coinciding with the Treasury’s decision to sell $103 billion of longer-term securities during its upcoming quarterly refunding auctions. As a result, the US dollar strengthened against most major currencies.
Ben Jeffery, a rates strategist at BMO Capital Markets, noted that the larger auctions in the next quarter contributed to the ongoing selloff. The market is now contemplating whether investors will buy the dip before the release of the upcoming payroll report or if the selloff has the potential to extend further as debates about the term premium and growing deficit continue.
The ADP Research Institute, in collaboration with Stanford Digital Economy Lab, reported an impressive increase of 324,000 private payrolls in July, surpassing all expectations. The upcoming monthly jobs report will provide further insights into the trajectory of the labor market.
Adding to the market unease, Fitch Ratings downgraded the US from its top-tier rating, citing concerns over the ballooning fiscal deficit and governance issues. This further worried equity investors, who were already apprehensive about the risks of a recession and the sustainability of the stock market’s previous gains.
Alexandre Baradez, chief market analyst at IG Markets, suggested that the market might be seeking reasons to take profits, and while the Fitch downgrade played a role, the growing fear of an economic slowdown emerged following disappointing data from China and the US.
In the corporate sphere, Pinterest Inc. (PINS) faced a drop after announcing that its current-quarter revenue would match analysts’ estimates, which left some investors disappointed, especially after rival digital-ad companies reported surprisingly positive results. However, CVS Health Corp. (CVS) experienced a rise after beating second-quarter profit and sales estimates, showcasing strength as the company streamlines operations and expands its healthcare offerings.
Looking ahead, investors are closely watching earnings reports from major companies such as Apple Inc. (AAPL) and Amazon.com Inc. (AMZN) for indications of how higher interest rates might affect the economy.
Market movements at a glance:
- S&P 500: -0.8%
- Nasdaq 100: -1.3%
- Dow Jones Industrial Average: -0.4%
- Stoxx Europe 600: -1.1%
- MSCI World index: -1.1%
Currency changes:
- Bloomberg Dollar Spot Index: +0.3%
- Euro: -0.2% to $1.0959
- British Pound: -0.6% to $1.2706
- Japanese Yen: little changed at 143.24 per dollar
Cryptocurrency:
- Bitcoin: +0.6% to $29,394.96
- Ether: +0.1% to $1,851.91
Bonds:
- 10-year Treasuries yield: +5 basis points to 4.08%
- Germany’s 10-year yield: -4 basis points to 2.52%
- Britain’s 10-year yield: -1 basis point to 4.39%
Commodities:
- West Texas Intermediate crude: -0.3% to $81.09 a barrel
- Gold futures: +0.2% to $1,982.60 an ounce
