Stock prices tend to fall when rates rise because stocks are historically risky investments.
Wall Street falls again this Thursday, while stock prices fall all over the world in the face of expectations that interest rates U.S. yields are expected to remain high well into next year and, as rising U.S. yields Treasury bonds boost growth stocks after the Fed signaled that another rate hike is expected this year.
The index S&P 500 go down a 1.1%. This drop follows that of Wednesday, after the body chaired by Jerome Powell indicated that it could cut interest rates next year by only half of what it had previously anticipated. The Fed has already raised its main interest rate to levels nnever seen since 2001which helps curb inflation, but at the cost of damaging investment prices.
Big tech stocks once again took the brunt, since they are usually the main victims of high rates. The index Nasdaq gives up 1.3%, with Amazon falling by 3.2% and Nvidia a 1.9%. Meanwhile, the Dow Jones loses 0.5%.
Wall Street: what’s behind the crash
Stock prices tend to fall when rates rise because stocks are historically risk investments. Why put up with its great oscillations when the Treasury bonds are paying more in interest than before? And they are paying much more. The 10-year Treasury yield offers a return of 4.5%, above the 4.4% registered late on Wednesday and only 0.5% three years ago. It is near its highest level since 2007.
Furthermore, a report showed that fewer American workers They applied for unemployment benefits last week than expected. It was the lowest figure since January and the last sign of a remarkably resilient labor market.
Such a strong labor market helps ease concerns about a possible recession. But it may also give American households fuel to keep spending, which could encourage companies to try to raise prices further. and maintain upward pressure on inflation.
Another report, meanwhile, suggests that the manufacturing industry in the Mid-Atlantic region is contracting much more than economists expected. A third report showed that US home sales were weaker last month than economists expected.
The manufacturing and housing sectors have been particularly affected by the rise in interest rates and they have suffered more than the labor market in general.
Source: Ambito
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