US equities closed lower Thursday after a sharp rise in Treasury yields spooked investors. The 10-year yield jumped to 4.49%, its highest level since early May, driven by concerns around the ballooning US budget deficit.
Key Market Moves:
- S&P 500: down 0.74%
- Dow Jones: down 1.53% – worst day since March
- Nasdaq: down 0.39%
- 10-year Treasury yield: up 13 bps to 4.49%
- US dollar: strengthened to 105.09
- Gold: slid to $2,338 per ounce
- Oil (WTI): dropped 1.6% to $76.87
What’s Driving the Sell-Off?
The surge in bond yields came after data showed the US budget deficit hit $1.2 trillion in the first seven months of FY24 — a 44% increase over the same period last year. Investors fear higher yields could pressure equity valuations, especially in rate-sensitive sectors like tech and real estate.
Meanwhile, weak demand in a $16 billion Treasury inflation-protected securities (TIPS) auction added to the negative sentiment.
Bigger Picture
Markets are now recalibrating expectations for interest rate cuts this year. While inflation has shown signs of cooling, the fiscal picture is creating fresh uncertainty.
Traders will watch closely for Fed commentary in the coming days, especially after minutes from the latest FOMC meeting signaled concern over sticky inflation and “no rush” to cut rates.
This post is for informational purposes only and does not constitute investment advice. Please consult a financial advisor before making any investment decisions.