The S&P 500 declined 1%, the DJIA shed 398 points, or 0.9%, while the Nasdaq composite dipped 1.2%
U.S. stocks dropped Monday after Treasury yields hit their highest levels since the summer and oil prices continued to rise.
The S&P 500 declined 1%, though it is still close to its all-time high set a week earlier. The DJIA shed 398 points, or 0.9%, dropping from its own record levels, while the Nasdaq composite dipped 1.2%.
It is a stall for U.S. stocks after they rallied to records on relief that interest rates are finally heading back down, now that the Fed has widened its focus to include keeping the economy going instead of just fighting high inflation. Friday’s blowout report on U.S. jobs growth raised optimism about the economy and hopes that the Federal Reserve can pull off a perfect landing for it.
The stronger-than-expected hiring pushed Goldman Sachs economist David Mericle to say he now sees just a 15% probability of a recession, down from 20%.
But Friday’s jobs report was so strong that it also forced traders to pare back forecasts for how much the Fed will ultimately cut interest rates by. That in turn has sent Treasury yields up, and the 10-year yield is back above 4% for the first time since August.
The two-year Treasury yield also briefly jumped back above 4% Monday, up from 3.50% a couple weeks ago. That’s a sizeable move for the bond market, and it can drag on prices for stocks and all kinds of other investments.
Monday’s sharpest losses hit stocks of utility companies. These kinds of stocks tend to pay big dividends, which means they can see potential buyers leave when bonds are paying more in interest.