Stock Market Stumbles Amid Increasing Yields and Global Tensions

Market Jitters in the Big Apple

By Lisa Pauline Mattackal and Pranav Kashyap

Manhattan’s financial scene was hit by a wave of unease this Monday, as U.S. stock indexes took a nosedive. With rising Treasury yields, traders recalibrated their expectations for Federal Reserve rate cuts. Add to that the escalating conflict in the Middle East, and you’ve got folks playing it safe.

Treasury Yields on the Rise

U.S. Treasury yields were in rally mode with the benchmark 10-year notes crossing that 4% line for the first time in two months. Even the two-year yield was flirting with 4%. This shift puts investors in a tough spot, as expectations for rate cuts at the upcoming Federal Reserve meeting get tossed around like a hot potato.

According to CME’s FedWatch tool, over 83% of investors now think there’ll be a 25 basis-point rate cut. Just last week, folks were betting on a 50-point cut until those stronger-than-expected non-farm payrolls data threw everyone for a loop.

"The interest rate outlook appears murky," says Tony Miano from the Wells Fargo Investment Institute. It all depends on how the economy shapes up over the next year.

Wall Street’s Epic Juggling Act

Now, when it comes to the stock market, megacap growth stocks got the short end of the stick. Tesla slid 2.3%, and Alphabet was down by 0.7%. Meanwhile, Amazon took a nearly 2.5% hit after Wells Fargo decided they weren’t all that special anymore.

Here are the numbers, if you’re keeping track:

Geopolitical Woes Weighing In

As if that wasn’t enough, tensions in the Middle East are adding salt to the financial wound. Early on Monday, Hezbollah launched rockets at Israel’s Haifa, while the Israeli forces prepared for more ground raids in southern Lebanon. The CBOE Volatility index shot up to 21.45, its highest level in nearly four weeks.

Energy’s Lone Bright Spot

So, what stocks weren’t sulking in the red? Energy stocks held their ground, gaining 0.7% as crude prices jumped amid fears of supply disruptions. That gave oil companies a nice little boost.

Meanwhile, Pfizer got a 3.1% lift thanks to activist investor Starboard Value buying a billion-dollar stake. And let’s not forget Air Products and Chemicals, who soared 7.8% courtesy of hedge fund Mantle Ridge making a move.

Eyes on the Future: CPI Data and Earnings

New York’s pros are keeping their eyes peeled for significant goings-on this week. The consumer price index data is due on Thursday. Plus, several Fed luminaries, like Michelle Bowman, Neel Kashkari, and Raphael Bostic, are sharing their wisdom later today. Oh, and don’t forget! Third-quarter earnings for S&P 500 companies are on the horizon, starting with some big banks setting the stage on October 11.

Wall Street will need to hold its breath. With the S&P 500 up about 20% this year, earnings reports will test the staying power of this rally. Goldman Sachs even raised its 2024 year-end S&P 500 target to 6,000 and, in a twist, lowered the odds of a U.S. economic recession to 15%.

What the Numbers Say

On the NYSE, losers outnumbered winners with a 2.46-to-1 ratio. The Nasdaq wasn’t much better, showing a 2.3-to-1 ratio of declining issues over advancers. S&P 500 posted 34 fresh 52-week highs, but only one new low. Meanwhile, the Nasdaq recorded 68 highs and 81 lows.

With the markets as jittery as a New York subway during rush hour, investors will be dealing with lots of what-ifs in the coming days.