The major US stock indices took a sharp tumble to the downside in the last minutes of trading closing at session lows. And so did yields. They too are closing/trading near the lowest levels of the day.
The Federal Reserve hiked rates by 25 basis points and kept the terminal rate of 5.1% for the end of 2023. The Fed chair said that the overwhelming view is that rates will not come down until 2024 sometime (they see 4.3% as the ending rate in 2024). Despite that view, yields came tumbling down, and stocks reacted to the upside:
- Dow industrial average reached a high of 201.28 points
- S&P index reached a high of 36.63 points
- NASDAQ index reached a high of 153.88 points
However as the day started to come to a close, selling in stocks kicked in. The closing levels are showing:
- Dow Industrial Average Minus -530.49 points or -1.63% at 32030.12
- S&P index -65.88 points or -1.65% at 3936.98
- NASDAQ index -190.14 points or -1.60% at 11669.97
- Russell 2000-50.38 points or -2.83% at 1727.35
Meanwhile the debt market, yields reacted negatively to the stocks declines. A snapshot of the yield curve near the close shows:
- two year yield 3.932%, -24.5 basis points
- five year yield 3.508% -23.5 basis points
- 10 year yield 3.436% -17 basis points
- 30 year yield 3.655% -8.1 basis points
Admittedly I'm a bit perplexed, but it seems at the end of the day stocks started to react to recession risk, but yields already have lot of easing priced in.