By Lisa Pauline Mattackal and Pranav Kashyap
(Reuters) – U.S. stock indexes fell on Monday, pressured by rising Treasury yields, as markets recalibrated expectations about Federal Reserve rate cuts, while escalating conflict in the Middle East kept operators on the sidelines.
U.S. Treasury yields rebounded as investors reassessed the path of Federal Reserve rates, with the benchmark 10-year bond yield rising above 4% for the first time in two months.
Investors are pricing in a more than 88% chance of a 25 basis point rate cut at the Federal Reserve’s November meeting, according to CME’s FedWatch tool, and an easing of around 50 basis points by the end of this year.
Rising yields cast a shadow over rate-sensitive mega-cap growth stocks. Alphabet (NASDAQ 🙂 lost 0.3%, Microsoft (NASDAQ 🙂 lost 0.3%, while Amazon (NASDAQ 🙂 fell nearly 3% after a Wells Fargo downgrade.
They fell 142.64 points, or 0.34%, to 42,210.11, lost 15.00 points, or 0.26%, to 5,736.07 and lost 48.61 points, or 0.27%, to 18,089.24 .
Rising geopolitical tensions in the Middle East have also affected investor appetite. Early Monday, Hezbollah rockets hit Israel’s third-largest city, Haifa.
Wall Street’s fear gauge rose to 21.45, its highest level in more than a month. It was the last time at 8:95 p.m.
Ten of the 11 S&P 500 sectors fell, with only energy stocks rising 0.4%. Crude oil prices extended gains on concerns about supply disruptions due to the Middle East conflict, boosting oil company stocks.
“(The) concerns that would keep people on the sidelines have to do with higher energy prices in the near term, (the) impact of that inflation and that yields that have been falling precipitously have now firmed up,” he said Art Hogan. , chief market strategist at B Riley Wealth.
Investors are eagerly awaiting consumer price index data, due out Thursday, and comments from several Federal Reserve officials, including Neel Kashkari and Raphael Bostic, who are scheduled to speak throughout the week.
Third-quarter results for S&P 500 companies also begin this week, with several major banks scheduled to report on October 11.
The gains will be a major test of Wall Street’s rally this year: The S&P 500 is up about 20% so far this year and is near all-time highs.
Goldman Sachs raised its target for the S&P 500 by the end of 2024 to 6,000 from 5,600, and also reduced its chances of a US economic recession from 20% to 15%.
Actions of Pfizer (NYSE:) rose 3.1% on Monday following a report that activist investor Starboard Value has taken a roughly $1 billion stake in the pharmaceutical giant.
Air Products and Chemicals (NYSE:) was the S&P 500’s top gainer based on a report that activist hedge fund Mantle Ridge has built a position in the company.
Declining issues outnumbered advancing ones by a ratio of 2.33 to 1 on the New York Stock Exchange. There were 90 new highs and 10 new lows on the New York Stock Exchange.
The S&P 500 posted 14 new 52-week highs and no new lows, while the Nasdaq Composite posted 44 new highs and 27 new lows.