Resurgent worries about rising U.S. bond yields hit U.S stocks heavily at its most recent trading session. global investors are currently waiting anxiously on what the most powerful monetary policymaker, Jerome Powell will say on the risk of a rapid rise in long-term borrowing costs.
The fear of higher U.S. bond yields undermined riskier assets like U.S stocks and other global equities.
Stock traders are treading cautiously on a macro that revealed the Benchmark 10-year U.S. Treasuries surged to 1.477% as investors anticipate U.S. inflation could pick up as economic recovery gathers momentum driven by government stimulus and further progress in the rollout of COVID-19 vaccines.
Stock bears took a grip on the world’s biggest and most liquid equity markets as Healthcare, Technology, and Consumer Services sectors drifted lower
- At the close in New York Stock Exchange, the Dow Jones Industrial Average plunged by 0.39%, while the S&P 500 index lost about 1.31%, and the NASDAQ Composite index dipped by 2.70%
- Stocks that recorded significant losses outnumbered advancing ones on the New York Stock Exchange by 1717 to 1512 and 67 ended unchanged; on the Nasdaq Stock Exchange, 2152 fell and 1175 advanced, while 57 ended unchanged.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on the rationality behind the recent sell-offs observed in U.S equity markets
Innes said, “The sell-off in global fixed income markets is revving up again, spilling over to unseat equities and other relatively heavily positioned risk-sensitive assets.
“Chicago Federal Reserve Bank, President Evans today did not push back on the rise in yields. He said he does not see a risk of inflation rising too quickly and does not think the Fed will need to change the duration of QE purchases.
“To my mind, the only thing left that might influence the Fed’s decision-making process would be whether financial conditions were to tighten or markets were deemed dysfunctional.”
What to expect: That being said, some stock market experts however share the opinion that it seems too early to raise the alarm as financial conditions seem loose, Fed intervention’s hurdle is high and will be higher always when activity and inflation data come in very strong through Q2.