The U.S. stock market faced some challenges on Wednesday as the 10-year Treasury bond yields rose to levels not seen in months. This surge was caused by better-than-expected economic data, leading to speculation that the Federal Reserve may not be as aggressive with interest rate cuts in the near future. Investors are keeping a close eye on statements from Fed members for any hints on the direction of monetary policy.
Despite expectations of rate cuts in 2024, the 10-year Treasury bond yield increased to 4.23%, putting pressure on risk assets and raising concerns about the sustainability of the recent stock market rally. In terms of corporate earnings, the third-quarter reporting season has been sending mixed signals. Companies like Philip Morris and General Motors exceeded market expectations with gains of +10% and +9% respectively.
However, other companies faced challenges. McDonald’s shares dropped more than 5% due to an E. coli outbreak linked to its Quarter Pounder burgers, which resulted in hospitalizations and one death. Starbucks and Coca-Cola also experienced losses during the session due to disappointing financial results. In the tech sector, Qualcomm saw a significant decline following reports that Arm may cancel a key license, adding more uncertainty to a sector already grappling with valuation reassessments.
Nasdaq futures fell by approximately -0.6%, reflecting uncertainty over Treasury yields and concerns about a less aggressive Federal Reserve approach to rate cuts. On Tuesday, Wall Street’s major indexes showed little change as investors awaited the Fed’s Beige Book, which could offer updates on U.S. economic conditions. The overall market sentiment is cautious as investors navigate through these challenges and uncertainties. It remains to be seen how the market will react to future developments in the coming days.
