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US Stocks May Crumble on Rising Treasury Yields

By Investors Hub

The major U.S. index futures are pointing to a lower opening on Tuesday, with stocks likely to move to the downside following the volatility seen in the previous session.

A continued increase in U.S. treasury yields is likely to weigh on the markets as the bond markets reopen following the Columbus Day holiday on Monday.

Upbeat economic data has pushed treasury yields higher in recent sessions, raising concerns the Federal Reserve may raise interest rates more aggressively than previously anticipated.

The ten-year yield has reached its highest levels in well over seven years, while the thirty-year bond yield has climbed to its highest level since 2014.

News the International Monetary Fund has lowered its forecast for U.S. and Chinese economic growth may also generate some selling pressure on Wall Street.

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Citing the ?negative effect of recent tariff actions,? the IMF said economic growth in the U.S. and China is now expected to slow to 2.5 percent and 6.2 percent, respectively, next year.

Overall trading activity may be somewhat subdued, however, as a lack of major U.S. economic data may keep some traders on the sidelines.

Stocks saw considerable volatility during trading on Monday, as many traders remained away from their desks amid the Columbus Day holiday. The major averages showed wild swings over the course of the trading session.

Eventually, the major averages ended the day mixed. While the Dow rose 39.73 points or 0.2 percent to 26,486.78, the Nasdaq slid 52.50 points or 0.7 percent to 7,735.95 and the S&P 500 edged down 1.14 points or less than a tenth of a percent to 2,884.43.

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The volatility on Wall Street came on the heels of the notable weakness seen over the final two sessions of the previous week.

A jump in treasury yields contributed to the pullback seen late last week, as traders expressed renewed concerns about the outlook for interest rates.

The yield on the ten-year note reached its highest closing level in over seven years last Friday following the release of the monthly jobs report.

Traders seemed reluctant to make significant moves on Monday, as the bond markets were closed along with banks and federal offices.

The holiday also led to a lack of U.S. economic data, although reports on producer and consumer prices are likely to attract attention in the coming days along with speeches by several Federal Reserve officials.

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Most of the major sectors ended the day showing only modest moves, contributing the lackluster close by the broader markets.

Tobacco stocks saw substantial strength, however, with the NYSE Arca Tobacco Index spiking by 9.4 percent to a new record closing high.

A Food and Drug Administration crackdown on e-cigarettes has contributed to significant volatility among tobacco stocks over the past couple weeks.

Commercial real estate stocks also saw notable strength on the day, while weakness among biotechnology, computer hardware, and semiconductor stocks contributed to the drop by the tech-heavy Nasdaq.

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Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

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