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.
According to CME’s FedWatch tool, investors are pricing in a more than 88% chance of a 25 basis point rate cut at the November Fed meeting, followed by a roughly 50 basis point cut by the end of this year.
The sharp rise in yields has cast a shadow on large-cap growth stocks that are sensitive to interest rates. Alphabet fell 0.3%, Microsoft fell 0.3% and Amazon fell nearly 3% following Wells Fargo’s downgrade.
The Dow Jones Industrial Average fell 142.64 points, or 0.34%, to 42,210.11, the S&P 500 fell 15.00 points, or 0.26%, to 5,736.07, and the Nasdaq Composite Index fell 48.61 points, or 0.27%, to 18,089.24.
Rising geopolitical tensions in the Middle East are also dampening investor appetite. Early Monday morning, Hezbollah rockets struck Haifa, Israel’s third largest city.
The CBOE Volatility Index, Wall Street’s fear gauge, rose to 21.45, its highest level in a month. The last time was 20:95.
Ten of the S&P 500’s 11 sectors fell, with only energy stocks rising 0.4%. Oil prices rose due to concerns about supply disruptions caused by conflicts in the Middle East, pushing up oil company stock prices.
“The concerns that are keeping people on the sidelines have to do with the near-term rise in energy prices, their inflationary impact, and the fact that yields, which had been falling rapidly, are now firming up,” said Art Hogan. ” he said. , Chief Market Strategist at B Riley Wealth.
Investors are looking forward to Thursday’s release of the consumer price index and comments from several Fed officials, including Neel Kashkari and Rafael Bostic, who are scheduled to speak later this week.
Third-quarter results for S&P 500 companies begin this week, with several large banks scheduled to report on October 11th.
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%.
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.
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Air Products & Chemicals became the top gainer on the S&P 500 after it was reported that activist hedge fund Mantle Ridge had taken a position within the company.
On the New York Stock Exchange, declining issues outnumbered advancing issues by a 2.33-to-1 ratio. On the New York Stock Exchange, 90 stocks hit new highs and 10 hit new lows.
The S&P 500 Index has recorded 14 new highs and no new lows in 52 weeks, while the Nasdaq Composite Index has recorded 44 new highs and 27 new lows.
(Reporting by Lisa Matakkal and Pranav Kashyap in Bengaluru; Editing by Shinjini Ganguly)
