FILE - Traders work on the floor at the New York Stock Exchange in New York, Wednesday, June 14, 2023. (AP Photo/Seth Wenig, File)
October 23, 2023 - 6:42 AM
NEW YORK (AP) — Wall Street is drifting lower in early trading as pressure from the bond market continues to build. The S&P 500 was down 0.5% early Monday. The Dow lost 171 points, and the Nasdaq composite was off 0.6%. Rapidly rising yields in the bond market have been knocking stock prices lower since the summer. The yield on the 10-year Treasury briefly topped 5.02% early Monday to touch its highest level since 2007. Oil prices fell to ease some of the pressure on inflation. Chevron dropped after saying it would buy rival Hess for $53 billion, the latest huge deal in the oil-and-gas industry.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
Wall Street was poised to open lower Monday morning, with markets under pressure from higher interest rates and the risk of broader conflict in the Middle East.
Futures for the S&P 500, Nasdaq and the Dow all fell about 0.4% before the bell Monday.
The yield on the 10-year Treasury briefly touched 5%, a level it hasn't reached since 2007. It quickly retreated back to 4.99%.
Stocks have been struggling under the weight of the bond market since high yields make borrowing more expensive for everyone and slow the economy while dragging on prices for stocks and other investments.
“Indeed, the trajectory of U.S. Treasurys is not merely a question; it is the only question for financial markets,” Stephen Innes of SPI Asset Management said in a commentary. “U.S. government bonds are the critical benchmark reference point against which virtually all other global assets are ultimately priced off.”
The Federal Reserve raised its overnight interest rate rapidly hoping to quash high inflation, which has come down from its peak last summer. The yield on the 10-year Treasury has recently has been catching up to the Fed's main interest rate, which is already above 5.25% — its highest level since 2001.
At midday in Europe, Germany’s DAX fell 0.6% and the CAC 40 in Paris was mostly unchanged. Britain’s FTSE 100 was down 0.5%.
Israeli warplanes conducted airstrikes on various targets in Gaza early Monday, including areas where Palestinian civilians had been instructed to seek shelter. Israel has announced its intention to step up its attacks on the Gaza Strip in preparation for the next stage of its war on Hamas.
The escalation of conflict in the Middle East has rattled markets, adding to uncertainty about oil supplies from the region if the fighting spreads.
Monday bought news of another big merger in the oil industry. Chevron said it would buy Hess Corp. for $53 billion. The deal comes on the heels of Exxon's agreement to buy Pioneer Natural Resources for $60 billion. Hess shares were little changed in premarket trading while Chevron shares dropped 2.3%.
A barrel of benchmark U.S. oil fell 46 cents to $87.52 per barrel early Monday. It has been bouncing around since the latest Hamas-Israel war began, after leaping from $70 per barrel to more than $93 during the summer. It slipped 62 cents to settle at $88.75 per barrel on Friday.
Brent crude, the international standard, slid 29 cents to $91.87 per barrel.
The Shanghai Composite index fell to the level it was at nearly three years ago before the COVID-19 pandemic, closing down 1.5% at 2,939.29. Hong Kong’s markets were closed for a holiday, as were Thailand’s.
International investors have been shifting their assets out of Chinese shares due to simmering geopolitical tensions, challenging economic conditions, and a crisis in the property industry.
Taiwan’s Taiex gave up 1.2%.
Shares in Taiwan-based Foxconn Technology Co., a Fortune 500 company known for making Apple iPhones, fell 2.2% after Chinese state media reported over the weekend that the company has been subjected to searches by Chinese tax authorities.
Tokyo’s Nikkei 225 index lost 0.9% to 30,999.55 as investors appeared to have little reaction to Japanese Prime Minister Fumio Kishida’s announcement that he plans “bold” measures, including an income tax cut for households hit by inflation and tax breaks for companies, to galvanize lackluster growth in the world’s No. 3 economy.
The Kospi in Seoul lost 0.8% to 2,357.02. Australia’s S&P/ASX 200 sank 0.8% to 6,844.10.
India’s Sensex declined 0.5%.
In currency trading, the U.S. dollar rose slightly to 149.90 Japanese yen from 149.87 yen. The euro cost $1.0609, rising from $1.0600 late Friday.
On Friday, Wall Street racked up more losses to close out its worst week in a month. The S&P 500 fell 1.3% and the Dow sank 0.9%. The Nasdaq composite tumbled 1.5%.
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News from © The Associated Press, 2023