U.S. stocks fall as Treasury yield rises

U.S. stocks slipped on Monday as the 10-year Treasury yield topped 4% for the first time since August. This came ahead of a week marked by key inflation data and the start of earnings season. The Dow Jones Industrial Average fell around 400 points, or 0.9%, after recently hitting a fresh record high.

October UMich Consumer Sentiment Index down to 68.9 vs. 71 est. & 70.1 prior; current conditions down to 62.7 vs. 63.3 prior; expectations down to 72.9 vs. 74.4 prior pic.twitter.com/fy43beuQCB

— Liz Ann Sonders (@LizAnnSonders) October 11, 2024

Rule of 20, which says market is fairly valued when S&P 500's P/E and CPI y/y add to 20, continues to suggest stocks look expensive pic.twitter.com/C4H6AYTILq

— Liz Ann Sonders (@LizAnnSonders) October 11, 2024

The S&P 500 shed almost 1%, while the tech-heavy Nasdaq Composite dropped nearly 1.2%, driven by declines in major technology stocks. Stocks reached session lows in afternoon trading following a judge’s order for Alphabet to open up Google Play, its app store business, to more competition. Shares of Amazon fell over 3%, while Microsoft lost over 1.5%. Nvidia was the only gainer among the “Magnificent 7” members, reflecting strong performance despite broader tech sector weaknesses. Oil futures surged over 3.5% on Monday, extending their largest weekly gains in over a year.

The highest $VIX close ever with a new S&P 500 all-time high?

26.57 on 9/2/2020.

The lowest? 9.14 on 11/3/2017

— Ryan Detrick, CMT (@RyanDetrick) October 11, 2024

This surge was fueled by concerns over Iran’s recent military actions potentially targeting petroleum fields, as well as Hurricane Milton’s upgrade to Category 5 status, which threatened the Gulf of Mexico’s oil production capabilities. Expectations for an outsized rate cut from the Federal Reserve dwindled following a stronger-than-expected jobs report last week. Traders have now largely abandoned bets on a 0.50% rate cut in November, with an 88% chance now seen for a 0.25% move.

Stocks decline as Treasury yield rises

These expectations will be scrutinized further this week, particularly with key consumer inflation data due on Thursday. Alphabet’s stock sank over 2% following the injunction to open up its Google Play app store to more competition. Changes mandated by the court include allowing rival Android applications. The case, stemming from a lawsuit filed in 2020, claims Google stifled competition through its app store policies. Apple stock was downgraded by Jefferies from Buy to Hold, with analyst Edison Lee citing inflated expectations for its AI-enabled iPhones. According to Lee, the current state of smartphone hardware is not advanced enough for the high-tech artificial intelligence functionalities expected by consumers and analysts alike. As Hurricane Milton strengthens to a Category 5, insurance and oil companies are bracing for impact. Florida-based Universal Insurance saw a significant drop in shares, down more than 18%, as crude futures rose in anticipation of potential disruptions to oil production. Shares of Trump Media & Technology Group surged about 15% after Elon Musk’s surprise appearance at a Trump rally in Pennsylvania. This event underscored Musk’s public support for Trump ahead of the next month’s election, providing a boost to the stock. Super Micro Computer experienced a stock surge driven by continued demand for its AI servers. The company’s announcement of significant shipment data since June helped lift its shares, demonstrating strong investor confidence in the growing AI sector.