Editor
Wall Street Bears the Brunt of Monetary Policy as the bond market achieves its highest level since 2008.
With inflation still well above the targeting rate, the Fed fight isn’t over, yet this has a significant effect on the bond market. The yields are crazy rising, the rally is not over, and the 10-year Treasury yield is threatening to reach a 16-year high.
On Wednesday, the 10-year Treasury yields reached their highest level since 1008, since the last financial crisis. Resurrecting a buried question about the economy’s future outlook The upward trend continued overnight, with gains increasing by 4 basis points (bps) to 4.29%. This increasing trend coincides with the release of the latest FOMC minutes, which underscored the possible need for more interest rate rises. In this context, the bond yield increase demonstrates the market’s sensitivity to changes in central bank communication and policy orientations, which have a considerable impact on investment strategies and portfolio decisions.
These market forecasts left the stock market in a vulnerable situation, posting negative gains. The S&P 500 benchmark was down by 0.77%, down to 4,370 bps, its lowest level since the bull market. The tech-heavy composite Nasdaq fell by 1.24% due to increasing worries of additional interest rate hikes through the remaining months of this year. The Dow was no exception for them; the index declined by 0.8%, down by 279 bps to 34.473.22 bps.
In essence, the consensus suggests that the Federal Open Market Committee (FOMC), the Fed’s policy-setting body, still has lingering worries about inflation and is not completely confident in navigating the challenges posed by inflation. This cautious sentiment, similar to that expressed in the July FOMC meeting minutes, continues to shape current market expectations and discussions surrounding the Fed’s approach to monetary policy.
However, the long-term effects of this approach are likely to cause severe injury to the U.S. economy, and one of them is higher bond prices. Meanwhile, the healthcare sector has deepened Wall Street’s losses. The S&P was down due to a significant loss in healthcare stocks, including Cisco and energy stocks. Shares of health insurers UnitedHealth and Cigna, both with PBM (Pharmacy Benefit Manager) units, experienced declines. For the first one, UnitedHealth’s shares fell nearly 2%. While Cigna’s shares dropped almost 7%. In other positive news, Cisco Systems stood out with an almost 4% climb. The company’s fiscal fourth-quarter revenues, which were above estimates, fueled this increase. Cisco, as a computer networking business, not only increased its market share but also increased its profit margins.
In other economic news, oil prices rallied again amid fears of future oil cuts and their effects on market supply. In a day marked by fury market movement, WTI reminded above $80 per barrel. Brent oil climbed by 0.5% to $84 per barrel. Still, GLD has declined by 0.5%, and the yellow metal is still above the $1900 market price.
With these indicators, investors see a higher potential for additional interest rate hikes in the next few months. Inflation is still above the targeting range of 2–3%, and the Fed shows no signs of retreating from the fight.
