Wall Street is falling as it faces the prospect of a 5 per cent yield on the 10-year Treasury for the first time since 2007.
The Australian sharemarket is set to open lower, with futures at 7am AEDT pointing to a fall of 58 points, or 0.8 per cent.Wall Street was falling on Thursday as it faced the prospect of a 5 per cent yield on the 10-year Treasury for the first time since 2007. Volatility was heightened as Jerome Powell said Federal Reserve officials would proceed carefully with interest-rate rises, while noting there’s evidence that policy isn’t “too tight” right now.
Yields swung after the Federal Reserve’s chair said again that the central bank would watch how the economy and inflation trended before making coming decisions on interest rates. It’s already pulled its main overnight interest rate to the highest level since 2001, and the 10-year Treasury yield has been catching up.
Fed Chair Jerome Powell said in a speech on Thursday that if growth for the US economy appeared persistently strong, it could push the Fed to raise rates further. But he also noted the recent rise in longer-term bond yields, such as the 10-year Treasury’s, had been doing some of the Fed’s work for it by slowing the economy without requiring additional rises.
While that’s good for an economy that has defied predictions of a recession, it could also give inflation more fuel. High yields hurt all kinds of stocks, but they hit particularly hard on those bid up on expectations for big growth far in the future and those seen as very expensive. That’s often put the spotlight on big tech recently, and some reported a mixed set of profits.after it reported weaker results for the summer than analysts expected. It’s been cutting prices to drive sales, but that also eats into its profitability.
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