US stocks fall again on interest rate angst

NEW YORK: Wall Street stocks dipped on Thursday (Oct 20) following the latest rise in US Treasury yield as weak housing data pointed to the drag from higher lending rates.

The yield on the 10-year US Treasury note climbed further above 4%, reflecting the market’s expectation for more aggressive Federal Reserve (Fed) interest rates to counter inflation.

Data showed existing home sales in the United States fell for an eighth straight month in September, as surging mortgage rates following earlier Fed rate increases weigh on demand.

“For a good part of Wall Street right now, it’s all about yields,” said Oanda’s Edward Moya, noting that more investors now expect interest rates to hit 5% next year, up from the current Federal Reserve policy rate range of 3.0-3.25%.

“There’s still a lot more economic pain that’s going to be coming. And that’s troubling for risk appetite right now,” Moya said.

The Dow Jones Industrial Average fell 90.22 points, or 0.3%, to 30,333.59, the S&P 500 lost 29.38 points, or 0.80%, to 3,665.78 and the Nasdaq Composite dropped 65.66 points, or 0.61%, to 10,614.84.

“It’s interest rates that are driving equity volatility, that is the way we have been looking at things all year, that is kind of the precursor of seeing things calm down in the equity space and feeling better about adding risk there is seeing volatility decline in interest rates,” said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina.

“I’m not sure we are going to be able to see that pause that a few Fed members have been pointing to and certainly a few market participants have been kind of latching on to.”

Worries about higher interest rates offset a largely positive set of earnings from IBM, A&T and others.

Better-than-expected results thus far has pushed earnings growth expectations for third-quarter for S&P 500 companies to 3.1% from a 2.8% increase earlier in the week, but still well below the 11.1% increase that was forecast at the start of July.

But Tesla tumbled 6.7% after reporting that profit more than doubled to US$3.3 billion but revenues missed analyst expectations.

JPMorgan Chase characterised the results as “modestly softer than expected”, with pricing not quite as strong, adding to “debates about demand destruction”. – AFP, Reuters

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