US stocks ended Friday’s trading session in the red, as the benchmark 10-year Treasury yield hovered just below 5% in the wake of comments by Federal Reserve Chair Jerome Powell.
The Dow Jones Industrial Average (^DJI) fell 0.9% or 270 points, while the S&P 500 (^GSPC) shed 1.3%. The tech-heavy Nasdaq Composite (^IXIC) dropped about 1.5%. All three major indexes posted weekly losses.
Stocks lost ground after Powell signaled the Fed is committed to its “higher for longer” rates stance, which spurred gains in Treasury yields. The benchmark 10-year yield (^TNX) rose briefly to 5% late on Thursday, a closely watched level not seen since July 2007.
“The underlying message is ‘don’t be looking for a bailout from the Fed anytime soon,’” Greg Whiteley, a portfolio manager at DoubleLine, told Reuters. “That gives people the go-ahead to take rates above 5%.”
On Friday afternoon, the yield on the 10-year retreated from that key level, dropping to around 4.91%, as part of a broader recovery in fixed-income assets. But the “pain trade” in bonds could have further to run, even after weeks of putting pressure on stocks.
Investors looking to earnings to lift the downbeat mood have yet to find relief, despite strong financial reports.
Also still weighing on shaky markets is the risk of the Israel-Hamas war turning into a wider Middle East conflict, after Israel’s defense chief hinted at a ground assault on Gaza at the weekend.
