Treasury yields are making a return

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Treasury yields are making 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. Megacaps such as Apple, Nvidia and Meta slid more than 2%. On Thursday, Asia-Pacific markets mostly followed Wall Street downwards. South Korea’s Kospi index lost around 0.7% as the country reported a 0.1% quarterly growth for its GDP, narrowly avoiding a technical recession.

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Potential ******** tie-ups for Apple IntelligenceOn Wednesday, Apple CEO Tim Cook met China’s Minister of Industry and Information Technology Jin Zhuanglong in the country, according to a

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. “The company could be looking to shore up collaboration with local players to launch Apple Intelligence in China,” said Ivan Lam, senior research analyst for Counterpoint Research. 

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The bottom line

Like an unwelcome ex-partner who shows up during the most inopportune times and refuses to leave, Treasury yields too have made a return and are 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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