Treasury yields have made a return

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Treasury yields have made a return

Specialist traders work inside a post on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., October 23, 2024.

Brendan McDermid | Reuters

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Yields continue weighing on stocksU.S. stocks slumped Wednesday as Treasury yields continued rising.  Europe’s regional Stoxx 600 index fell 0.3%. Separately, policymakers at the ********* Central Bank are not unanimous over the need to lower rates by half a percentage point at its December meeting.

Tesla beats earnings forecastTesla shares jumped 12% in extended trading after the company’s third-quarter earnings beat Wall Street estimates. However, Tesla’s revenue for that *******, up 8% year on year, marginally missed expectations.

IBM’s revenue misses expectationsIBM’s third-quarter revenue missed expectations. For the *******, its top line grew 1.5% year over year, largely boosted by the consensus-beating $6.52 billion in revenue from IBM’s software segment. IBM thinks overall revenue will expand by around the same amount for the fourth quarter. Its shares fell around 3% in extended trading.

‘Time to be a little bit cautious’Norges Bank Investment Management, which manages Norway’s sovereign wealth fund, said the current state of geopolitics and stock markets warrant a cautious approach. “It is a time to be a little bit cautious, and I think the risks are more on the downside in the equity markets than on the upside,” Trond Grande, deputy CEO of NBIM, told CNBC Tuesday.

[PRO] A 6,600 goal for the S&P in 2025?The S&P 500 has been on a tear in 2024. There are several headwinds that might slow down the rally before the year ends, said Piper Sandler’s chief market technician. But he thinks the S&P can rise even further and hit the 6,600 level next year, around 13.8% higher than the S&P’s closing level on Wednesday.

The bottom line

Like an unwelcome ex-partner who shows up during the most inopportune times and refuses to leave, Treasury yields too have been hogging the market limelight.

Yields have been rising over the past month with the 10-year Treasury yield gaining about four basis points to 4.25% on Wednesday. During the U.S. trading session, the 10-year yield touched 4.26%, its highest level since July 26.

This is happening even as the U.S. Federal Reserve slashed interest rates by 50 basis points at its September meeting and indicated it would lower rates further by the same amount by the end of the year.

It seems like markets have oscillated from worrying about weakness in the U.S. to worrying that the U.S. economy is too strong.

The Fed’s “

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” struck a positive note on the economy. Most regions in the U.S. “reported low worker turnover, and layoffs reportedly remained limited,” the report stated, while “contacts were somewhat more optimistic about the longer-term

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.”

It’s not inconceivable, then, that the strong economy might prompt the Fed to slow down, or even hold back, its rate cuts.

“To me, it’s all about the impact of higher rates. The market is repricing the probability that the Fed can aggressively cut rates,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management.

The stock market slumped as yields rebounded. The S&P 500 retreated 0.92%, the Dow Jones Industrial Average lost 0.96% — its worst day in more than a month — and the Nasdaq Composite fell 1.6%.

But Paul Hickey, co-founder of Bespoke Investing Group, said investors shouldn’t panic. “It’s a rough day, but these days happen,” Hickey told CNBC. And Wells Fargo thinks stocks could rally in 2025 despite near-term uncertainties.

While rising Treasury yields appear to have stalled the stock rally, like most unwanted guests, they’ll likely retreat in time and markets should resume their upward course if earnings remain strong.

— CNBC’s Jeff Cox, Lisa Kailai Han, Pia Singh and Brian Evans contributed to this report.  

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