Global Stocks Take a Hit as Treasury Yields Surge
The global stock market has experienced a sharp decline for the third consecutive session, with Wall Street taking a significant tumble. This downturn is largely attributed to the recent surge in U.S. Treasury yields, prompting investors to take profits at the end of a remarkable year for equities.
U.S. Markets Feel the Pressure
All three major U.S. indexes have plummeted, with each experiencing a decline of over 1%. The S&P 500 sectors have also been affected, with all 11 sectors trading in negative territory. The benchmark 10-year U.S. Treasury yield has reached a critical point, surpassing the 4.5% mark, sparking concerns about stock market valuations.
Investors Seek Safety in Treasuries
According to David Morrison, senior market analyst at Trade Nation, “If yields continue to hold at these levels, this will be a strong headwind for equity prices, as investors choose the relative safety of a near-guaranteed 5% return on funds in U.S. Treasuries, compared with the uncertainty of stocks, many of which are trading at or near all-time highs.”
Market Performance
The Dow Jones Industrial Average has fallen 688.67 points, or 1.60%, to 42,303.33, while the S&P 500 has declined 99.37 points, or 1.66%, to 5,871.49. The Nasdaq Composite has also taken a hit, falling 371.85 points, or 1.89%, to 19,350.18. Despite this downturn, U.S. stocks have still experienced a remarkable year, with the S&P 500 up over 23%.
Economic Forecast and Rate Cuts
The recent economic forecast from the Fed, combined with concerns about Trump’s policies, such as tariffs, have contributed to the surge in yields. The 10-year Treasury yield has reached its highest level since May 2, at 5.641%. However, U.S. yields have declined slightly, following data that showed business activity in the U.S. Midwest contracted more than expected in December.
Global Market Impact
MSCI’s gauge of global stocks has fallen 11.29 points, or 1.33%, to 840.33, but remains up nearly 16% on the year. European stocks have also been affected, with the pan-European STOXX 600 index falling 0.68%. The 10-year German bund yield is holding near six-week highs, contributing to the decline.
Currency and Commodities
The U.S. dollar has strengthened, with the dollar index rising 0.14% to 108.13. The euro has fallen 0.24% to $1.0402, while the dollar has weakened 0.49% against the yen. U.S. crude has risen 0.84% to $71.19 a barrel, and Brent has increased 0.43% to $74.49 per barrel.
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