Market Watch – Oct. 5, 2018
U.S. Stocks Tumble as Bond Yields Hit Multi-Year Highs
U.S. stocks declined sharply on Thursday as U.S. Treasury yields rose to their highest level in more than seven years on robust economic data and positive comments from the Fed, sparking fears of mounting inflation. The Dow dropped for the first time in six sessions and was on pace for one of its biggest one-day drops in recent months.
The Nasdaq also fell nearly 2%, as many key names declined. Despite the pullback, U.S. stocks are still trading near record levels, raising concerns about inflated valuations with the earnings season right around the corner. Thursday’s rout was a stern reminder as to just how vulnerable the nine-year bull market is to interest-rate shocks. Much investor attention will be focused Friday on the U.S. Labor Department’s jobs report as strong data could send stocks and bond prices reeling again.
The CBOE Global Markets volatility index, known as Wall Street’s “fear gauge,” jumped 30% to its highest level since July, suggesting that investors might be bracing for more volatility. By late Thursday afternoon, the U.S. 10-year Treasury had settled just below 3.19%. The surge in Treasury yields has also prompted a rise in government bond yields across the globe.