Dow struggles for direction as investors react to rising Treasury yields and strike deal to avoid rail strike

The Dow rose briefly on Thursday afternoon, but lost its hold on gains as stocks traded mixed and bond yields rose further ahead of a likely Federal Reserve interest rate hike the next week.

President Joe Biden also confirmed that a deal to avert a national freight railroad strike had been reached, removing the threat of supply chain disruptions.

What is happening
  • The Dow Jones Industrial Average
    DJIA,
    -0.63%

    was down 37 points, or 0.1%, at 31,093.

  • The S&P 500
    SPX,
    -1.27%

    fell 30 points, or 0.7%, to 3,916.

  • The Nasdaq Composite
    COMP,
    -1.64%

    fell 121 points, or 1%, to 11,597.

On Wednesday, the Dow Jones Industrial Average rose 30 points, or 0.1%, to 31135, the S&P 500 rose 13 points, or 0.34%, to 3946, and the Nasdaq Composite gained 86 points, or 0.74%, to 11720.

What drives the markets?

Big tech stocks led the decline on Thursday, with the 2-year Treasury yield trading around 40 basis points above the 10-year yield, suggesting an economic slowdown ahead as investors digested a mixed batch of data economic.

In recent trading, the 2-year yield BX:TMUBMUSD02Yrose 7.2 basis points to 3.844%, while the 10-year yield BX:TMUBMUSD10Yis up 3.1 basis points to 3.446%.

“There are three factors driving the markets today and the most important of these is that people are hyper focused on the yield curve, especially two-year yield curve, which remains stubbornly high,” Art Hogan said. , chief market strategist at B. Riley Financial.

“That reflects our interpretation of what monetary policy will be in the near term.”

As stocks continue to rise after Tuesday’s disappointing U.S. consumer price inflation data sparked the worst selloff in two years, investors were relieved that a nationwide railroad strike of iron has been avoided.

See: White House says tentative pact reached to avert railroad strike

Shares of railroad operators rose as President Biden spoke publicly to confirm news of the deal, with Union Pacific Corp.
UNP,
+0.10%

up 1.9%, while Canadian Pacific Railway Limited
PC,
-2.00%

was down 0.3%. The Dow Transport Average
TDI,
-0.92%

was down about 0.1%.

In US economic data on Thursday retail sales rose 0.3% in August as Americans spent more on new cars and trucks and went out to eat more, suggesting the economy grew at a steady pace late in the summer.

Meanwhile new jobless claims fell 5,000 to 213,000 in the week ended Sept. 10, the Labor Department said, suggesting the labor market remains healthy.

However, two regional gauges of manufacturing sentiment entered mild contraction territory in September, according to data released Thursday.

As the weekend approaches, market participants are eagerly awaiting the Federal Reserve’s two-day policy meeting next week, where the central bank is expected to raise its benchmark interest rate by 75 basis points or more. .

“I think they could now raise rates in November just before the midterm elections and possibly in December,” said Louis Navellier of Navellier and Associates in Nevada. “After that, they should be done. I think the Fed’s goal is to drive rates up and then watch what it does to the economy. They have already hurt the housing market and they will hurt other interest rate sensitive sectors of our economy. ”

Actions in the spotlight

—Steve Goldstein contributed to this article

Listen to Carl Icahn at the Best New Ideas in Money Festival September 21 and 22 in New York. The legendary trader will reveal his take on this year’s market madness.

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