US equities show significant gains overnight despite high Treasury yields

US Stock Futures They were trading higher early Wednesday even as Treasury yields had hit their highest levels in months.

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A rapid rise in Treasury yields is forcing investors to reassess if prices have risen too much for stocks, particularly the most popular ones. On Tuesday, the 10-year Treasury yield jumped to 1.54%, its highest level since the end of June. That’s an increase of 1.32% a week ago.

Early on Wednesday, it remained stable at 1.53%.

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“What we have here is a stock market that finally looks vulnerable as Treasury yields rise, oil prices seem to easily hit $ 90 a barrel, and supply chain problems show no signs of abating. relief, “said Edward Moya of Oanda in a comment.

On Tuesday, the benchmark S&P 500 index fell 2%, its worst fall since May, and the high-tech Nasdaq fell 2.8%, its worst fall since March. Those declining outnumbered those advancing on the New York Stock Exchange 4 to 1.

US stock futures were trading higher early Wednesday, even as Treasury yields had hit their highest levels in months.

The benchmark S&P 500 index is down 3.8% so far this month and is on track for its first monthly loss since January, having gained nearly 16% since early 2021.

Bond yields began to rise last week after the Federal Reserve sent the clearest signals yet that the central bank is moving closer to begin withdrawing the unprecedented support it has provided to the economy during the pandemic. The Fed indicated that it could start raising its benchmark interest rate sometime next year and will likely begin to slow down its monthly bond purchases before the end of this year.

An increase in yields means that Treasuries are paying more interest and that gives investors less incentive to pay high prices for stocks and other things that are riskier bets than US government bonds. . The recent rate hike has hit tech stocks especially hard because their prices seem more expensive than much of the rest of the market, relative to the gains they make.

The S&P 500 fell 90.48 points to 4,352.63. The Dow Jones industrial average lost 1.6% to 34,299.99.

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Small business stocks also lost ground. The Russell 2000 Index fell 2.2% to 2,229.78.

Chipmaker Nvidia fell 4.4%, Apple fell 2.4% and Microsoft fell 3.6%. The broader tech sector is also grappling with a global shortage of chips and parts due to the virus pandemic. That could get worse as factories in some parts of China are idle due to power shortages.

Companies warn that supply chain problems and higher prices could affect sales and profits. The Federal Reserve has argued that the rise in inflation is temporary and linked to supply chain disruptions as the economy recovers from the pandemic.

Meanwhile, Asian stocks fell sharply on Wednesday after a wide slide on Wall Street as investors reacted to rising US government bond yields.

The Nikkei 225 in Tokyo plunged 2.1% to 29,544.29 and the Kospi in Seoul fell 1.2% to 3,062.18. The Shanghai Composite Index lost 1.6% to 3,544.07. In Sydney, the S & P / ASX 200 fell 1.4% to 7,174.20.

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Hong Kong’s Hang Seng Index reversed previous losses, gaining 0.6% to 24,639.86 after troubled real estate developer Evergrande Group said it was selling a stake in Shengjing Bank for 9.9 billion yuan (1.5 billion yuan). dollars), one step in addressing your cash shortage.

Evergrande shares listed in Hong Kong rose 10.9%.

In Japan, the election by the Liberal Democratic rulers of former Foreign Minister Fumio Kishida to head the party and thus become the next prime minister came after the markets closed.

Kishida, 64, is seen as an establishment figure, though he has called for measures to address growing inequality in Japan, the world’s third-largest economy.

In other trading, US benchmark crude oil fell $ 1.29 to $ 74.00 a barrel in electronic trading on the New York Mercantile Exchange. It lost 16 cents to $ 75.29 a barrel on Tuesday.

Brent crude oil, the standard for international prices, fell $ 1.28 to $ 77.07 a barrel.

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The US dollar fell to 111.42 Japanese yen from 111.48 yen. The euro changed little, at $ 1.1682.

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