During late-morning trading on Friday, US stocks continued to slide, and benchmark Treasury yields retreated after briefly spiking to 5% following comments made by Federal Reserve Chair Jerome Powell.
The Dow Jones Industrial Average (^DJI) fell 0.4%, or 140 points, while the S&P 500 (^GSPC) dropped 0.8%, and the Nasdaq Composite (^IXIC) declined 1.25%. All three indexes were on track for a losing week after Thursday’s sell-off.
The decline in stocks came after Powell signaled that the Fed would maintain its “higher for longer” rates stance, which led to gains in Treasury yields. The benchmark 10-year yield (^TNX) briefly rose to 5% on Thursday, a level not seen since July 2007.
“The underlying message is ‘don’t be looking for a bailout from the Fed anytime soon,'” said Greg Whiteley, a portfolio manager at DoubleLine, to Reuters. “That gives people the go-ahead to take rates above 5%.”
On Friday, the 10-year yield retreated from the key level, dropping to around 4.91%, as fixed-income assets saw a broader recovery. However, there could still be further pressure on stocks as the bond market continues to fluctuate.
Despite strong financial reports, investors hoping for earnings to lift the downbeat mood have not yet found relief.
Additionally, the risk of the Israel-Hamas war turning into a wider conflict in the Middle East is weighing on shaky markets, following hints by Israel’s defense chief of a possible ground assault on Gaza over the weekend.
