Friday's Market Minute: Higher Treasury Yields Continue to Rattle Markets

U.S. stocks remain weak and volatile as the bond market sell-off is picking up again after further signs the Fed is going to remain hawkish. This may end up being the 12th consecutive week of higher ten-year Treasury yields, advancing nearly 1.75% in 3 months to above 4.25% as of yesterday. Equities and bonds are still under pressure, and this week’s housing report data should not be a shock to anyone as existing home sales declined for the eighth month in September, down 1.5%.

The employment market remains robust, which gives the Fed the green light to continue raising rates. The Labor Department reported yesterday that there were only 214,000 initial claims for unemployment during the week, down from 226,000 the week before. This is right around the low level they have averaged this year.

The year-to-date rush into cash follows a long, drawn out sell-off in U.S. equity markets this year, which has wiped nearly $15 trillion from valuations of publicly traded companies. Although we may be near a temporary low for equities conditional upon favorable seasonal trends historically seen in late October, the cyclical bear market low may not be observed until several internals turn around. On a lighter note, there are pockets of strength across a few areas of the market that suggest a near-term bottom may be forming. High-yield corporate bonds and small-caps have outperformed the S&P 500 over the past few days, and the VIX has not yet exceeded levels seen in June even though the S&P 500 printed a new 52-week intraday low last Friday.

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