As Bond Yields Continue to Rise, U.S Stocks Fall to Start the Final Week of September

Stock markets commenced the week on a subdued note, with major U.S. indices preparing to conclude September with losses. Investor concerns revolve around the escalating bond yields and signals from the Federal Reserve indicating a prolonged period of elevated interest rates.

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Key Highlights:

• The Dow Jones Industrial Average (DJIA) saw a decline of 76 points, or 0.2%, settling at 33,890.
• The S&P 500 (SPX) retreated by 4 points, or 0.1%, to 4,316.
• The Nasdaq Composite (COMP) inched up by 4 points, less than 0.1%, reaching 13,216.

Last week, the S&P 500 experienced a 2.9% drop, marking its most substantial weekly decline since the week ending March 10. This decline culminated in the index reaching its lowest point since June 9. The Dow recorded its lowest closing value since July 10 on Friday, while the Nasdaq closed at its lowest level since June 7.

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Market Influences:

A prominent influence setting the tone for the markets early on Monday was the rapid ascent in long-term interest rates. Technical experts at Bank of America noted that while conclusive evidence of the 10-year yield's upward movement completion is absent, the trend is stretching its limits.

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The 10-year Treasury yield increased by over 9 basis points, surpassing 4.52%. Additionally, mounting concerns regarding the economic outlook stemmed from the considerable rise in oil prices over the summer, with both Brent crude, the global benchmark, and West Texas Intermediate crude, the U.S. benchmark, surging above $90 per barrel.

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Fawad Razaqzada, market analyst at Forex.com and City Index, commented on the market's recent struggles. He cited concerns related to escalating oil prices, surging bond yields, subdued global manufacturing activity, and persistent inflation in major developed economies as factors contributing to investor risk aversion. Consequently, investors have exhibited a reduced appetite for assuming higher levels of risk.

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Rather than swiftly seizing opportunities during market downturns, traders have chosen to remain cautious, opting to curtail asset prices during moments of relief rallies, Razaqzada noted.

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On the labor front, a tentative deal was reached on Sunday to conclude a historic screenwriters strike that had persisted for nearly five months. However, no deal seemed imminent for striking actors.

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Separately, President Joe Biden is slated to travel to Michigan this week to stand in solidarity with United Auto Workers union members involved in a strike against the Big Three automakers—Ford Motor Co., General Motors Co., and Stellantis NV, which owns Chrysler.

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The housing crisis in China also garnered attention, as Evergrande shares plummeted due to the company's abandonment of a $35 billion debt-restructuring plan. Furthermore, shares of China Aoyuan Group registered a significant decline on their first day of trading in over a year. The Hang Seng index in Hong Kong saw a decline of 1.8% in response to these developments.

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