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Markets Struggle with Bond Yields, Fed Chair and Earnings
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Markets began today’s session looking fairly hale, aside from the small-cap Russell 2000 again, which continues to be spooked by ever-higher bond yields, but hit an early afternoon swoon after Fed Chair Jerome Powell spoke on monetary policy perhaps needing to be ratcheted up yet again. Indices closed near session lows, with the Dow -250 points, -0.75%, the S&P 500 -0.85%, the Nasdaq hived off -128 points, -0.96% and the Russell -1.5% on the day.
Powell said inflation is still too high, and that monetary policy — at 5.25-5.50%, the highest in 16 years — was still not too tight. This has helped speculators ramp up expectations to 40% that a fresh 25 basis point (bps) hike is on the way at the next Federal Open Market Committee (FOMC) meeting October 31st and November 1st. Many analysts have felt that a single rate hike for the remainder of 2023 may be warranted; if the Fed hikes November 1st, this will raise the likelihood for a raise in the December FOMC meeting, as well.
The yield on a 10-year bond climbed all the way to 4.996% today, the closest it has gotten to 5% since 2007, when it last crossed that threshold. A near 5% guaranteed rate on a bond yield has increasingly looked like a good idea, especially to investors holding a lot of small-cap equities with innate higher risks. This has led the Russell to sell off more than its index brethren, not just today but going back a ways. Year to date, it’s now the only major index in the red.
And a warning about Tesla’s (TSLA - Free Report) Cybertruck from CEO Elon Musk at yesterday’s conference call after his company posted earnings has led to a slide in Tesla shares today. “We dug our own grave with Cybertruck,” is an actual quote from Musk yesterday about the new vehicle about to be launched. “I want to temper expectations” about the Cybertruck, said Musk. As a result, shares of the EV leader sank -9.3% in late trading today. The company is still up +100% or more year to date.
Rail giant CSX Corp. (CSX - Free Report) put up in-line results after today’s closing bell, with 42 cents per share coming in exactly where the Zacks consensus was, with revenues of $3.57 billion eking out a one-cent beat on the top line. This is the 10th straight non-miss on earnings for the Jacksonville, FL-based freight transportation company. Shares fell -0.33% in today’s after-market, -1.10% year to date but +12.8% year over year.
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Markets Struggle with Bond Yields, Fed Chair and Earnings
Markets began today’s session looking fairly hale, aside from the small-cap Russell 2000 again, which continues to be spooked by ever-higher bond yields, but hit an early afternoon swoon after Fed Chair Jerome Powell spoke on monetary policy perhaps needing to be ratcheted up yet again. Indices closed near session lows, with the Dow -250 points, -0.75%, the S&P 500 -0.85%, the Nasdaq hived off -128 points, -0.96% and the Russell -1.5% on the day.
Powell said inflation is still too high, and that monetary policy — at 5.25-5.50%, the highest in 16 years — was still not too tight. This has helped speculators ramp up expectations to 40% that a fresh 25 basis point (bps) hike is on the way at the next Federal Open Market Committee (FOMC) meeting October 31st and November 1st. Many analysts have felt that a single rate hike for the remainder of 2023 may be warranted; if the Fed hikes November 1st, this will raise the likelihood for a raise in the December FOMC meeting, as well.
The yield on a 10-year bond climbed all the way to 4.996% today, the closest it has gotten to 5% since 2007, when it last crossed that threshold. A near 5% guaranteed rate on a bond yield has increasingly looked like a good idea, especially to investors holding a lot of small-cap equities with innate higher risks. This has led the Russell to sell off more than its index brethren, not just today but going back a ways. Year to date, it’s now the only major index in the red.
And a warning about Tesla’s (TSLA - Free Report) Cybertruck from CEO Elon Musk at yesterday’s conference call after his company posted earnings has led to a slide in Tesla shares today. “We dug our own grave with Cybertruck,” is an actual quote from Musk yesterday about the new vehicle about to be launched. “I want to temper expectations” about the Cybertruck, said Musk. As a result, shares of the EV leader sank -9.3% in late trading today. The company is still up +100% or more year to date.
Rail giant CSX Corp. (CSX - Free Report) put up in-line results after today’s closing bell, with 42 cents per share coming in exactly where the Zacks consensus was, with revenues of $3.57 billion eking out a one-cent beat on the top line. This is the 10th straight non-miss on earnings for the Jacksonville, FL-based freight transportation company. Shares fell -0.33% in today’s after-market, -1.10% year to date but +12.8% year over year.
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