Written by Lisa Pauline Matakkal and Pranav Kashyap
(Reuters) – U.S. stock indexes fell on Monday, weighed down by rising U.S. Treasury yields as markets readjusted expectations for Federal Reserve interest rate cuts, while escalating conflict in the Middle East weighed on traders. He remained on the sidelines.
U.S. Treasury yields rose as investors reassessed the Fed’s interest rate path, with the benchmark 10-year Treasury yield above 4% for the first time in two months and the 2-year yield at one point rising to 4%.
Investors are pricing in a more than 83% chance of a 25 basis point rate cut at the November Fed meeting, according to CME’s FedWatch tool, after Friday’s better-than-expected nonfarm payrolls The bank has backed off its bet on a 50 basis point rate cut. .
“The outlook for interest rates appears uncertain and will depend on the strength and weakness of the economy over the next year,” said Tony Miano, investment strategy analyst at Wells Fargo Investment Institute.
The spike in yields has cast a shadow on large-cap growth stocks that are sensitive to interest rates, pushing down Tesla shares by 2.3% and Alphabet shares by 0.7%. Amazon.com fell nearly 2.5% following Wells Fargo’s downgrade.
The Dow Jones Industrial Average fell 206.27 points, or 0.49%, to 42,146.48, the S&P 500 fell 18.18 points, or 0.32%, to 5,732.89, and the Nasdaq Composite Index fell 62.58 points, or 0.35%, to 18,075.26.
Rising geopolitical tensions in the Middle East are also dampening investor appetite.
The CBOE Volatility Index, Wall Street’s fear gauge, rose to 21.45 and ended at 20.77, a nearly four-week high.
Earlier on Monday, Hezbollah fired rockets at Haifa, Israel, while the Israeli military poised to expand ground air strikes into southern Lebanon.
Most sectors in the S&P 500 fell, with energy stocks being the notable outlier, rising 0.7%. Oil prices rose due to concerns about supply disruptions caused by conflicts in the Middle East, pushing up oil company stock prices. (or)
Pfizer stock rose 3.1% on Monday after news that activist investor Starboard Value had acquired about $1 billion in shares of the pharmaceutical giant.
Meanwhile, Air Products & Chemicals was among the top gainers in the S&P 500 index, rising 7.8% after reports that activist hedge fund Mantle Ridge had taken a position in the company.
This week, investors will be looking forward to Thursday’s Consumer Price Index release and comments from several Fed officials, including Michelle Bowman, Neel Kashkari and Rafael Bostic, who are scheduled to speak later Monday. I’m looking forward to it.
Third-quarter results for S&P 500 companies begin this week, with several large banks scheduled to report on October 11th.
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Earnings will be a key test of Wall Street’s stock rally this year. The S&P 500 is up about 20% since the beginning of the year and is near all-time highs.
Goldman Sachs raised its target for the S&P 500 index by the end of 2024 from 5,600 to 6,000, and also lowered the probability of a U.S. recession from 20% to 15%.
Declining issues outnumbered advancing issues on the New York Stock Exchange by a ratio of 2.46 to 1, and on the Nasdaq by a ratio of 2.3 to 1.
The S&P 500 Index posted 34 new 52-week highs and one new low, while the Nasdaq Composite Index posted 68 new highs and 81 new lows.
(Reporting by Lisa Matakkal and Pranav Kashyap in Bengaluru; Editing by Shinjini Ganguly)
