The constrictor of higher interest rates is tightening its coils around Wall Street, resulting in most stocks closing lower on Monday. The S&P 500 remained relatively unchanged, while the Dow Jones Industrial Average experienced a decline of 74 points, and the Nasdaq composite saw a rise of 0.7%. The market was weighed down by slumps in oil-and-gas stocks, as crude prices gave back some of the gains they had made since the summer. Over three-quarters of stocks within the S&P 500 saw a decline, but the support from influential Big Tech stocks like Apple helped to offset these losses. Treasury yields reached heights not seen in over a decade.
Since the end of July, stocks have given back about 40% of the strong gains they made this year. This is largely due to the growing acceptance on Wall Street that high interest rates are here to stay, as the Federal Reserve attempts to lower high inflation. Consequently, Treasury yields have reached their highest levels in over a decade. On Monday, the yield on the 10-year Treasury climbed to 4.67% from 4.58% on Friday, nearing its highest level since 2007. Stocks that pay high dividends and have relatively stable businesses are experiencing particular pain, as their investors are more likely to switch between stocks and bonds. This puts utility companies in a difficult position, with PG&E and Dominion Energy suffering losses of 5.6% and 5.3% respectively, among the sharpest declines in the S&P 500.
Stocks in the energy sector were dragged lower by the drop in oil prices. Exxon Mobil fell 1.7%, and Chevron lost 1.2%. SmileDirectClub experienced a significant drop of 61.2% to 16 cents after filing for Chapter 11 bankruptcy protection. On the positive side, Discover Financial Services saw the largest gain in the S&P 500 with a rise of 4.9%. The company provided details about a consent order it received from the Federal Deposit Insurance Corp, requiring Discover Bank to improve its consumer compliance management system. Analysts pointed out that the absence of a fine for Discover could be seen as a positive for the stock.
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