Stock Rally Fades After Two-day Surge, Yields Spike Back Up

  • Oct 5, 2022
  • Barry Adams
  • Major averages on Wall Street declined after surging for two days in a row. Bond yields rose. UK Prime Minister Truss doubled down on tax and borrow policy, putting more pressure on the pound.

    Benchmark indexes trend lower after two days of market rally on the hopes that the Fed may have gone too far in hiking rates. 

    The S&P 500 index traded down 0.86% and the Nasdaq Composite index dropped 1.06%. 

    Crude oil rose 25 cents to $86.79 a barrel and natural gas prices fell 13 cents to $6.70 a thermal unit. 

    The yield on 2-year Treasury notes rose to 4.13%, 10-year Treasury notes inched up to 3.69% and 30-year bonds edged up to 3.74%. 

     

    European Markets Turn Lower 

    European markets traded lower after two days of rally and recession worries were in focus after business activities in the euro zone declined more than expected. 

    The Purchasing Managers' Index dropped to a 20-month low 48.1 in September from 48.9 in August, S&P Global said Wednesday. 

    The seasonally adjusted index for the UK declined to 49.1 from 49.6 in August.   

    Any reading below 50 indicates a contraction in growth and above 50 shows expansion. 

    The DAX index fell 0.9% to 12,557.21, the CAC-40 index dropped 0.7% to 5,996.81 and the FTSE 100 index declined 0.9% to 7,023.80. 

    The euro traded down to 0.99 U.S. cents and the British pound inched lower to $1.134. 

     

    Prime Minister Truss Doubles Down, Pound Wobbles 

    UK Prime Minister Liz Truss doubled down on her policy of cutting taxes and increasing government borrowing. 

    “For too long, our economy hasn’t grown as strongly as it should have done,”  and Truss added “We must level up our country in a Conservative way,” said the Prime Minister at her first conference speech as Conservative Party leader. 

    Conservative Party is holding a four-day conference in Birmingham, UK among party rebellion and infighting on the future course of the policy steps. 

    The UK economy, like many other European economies, is mired in slow or no growth for more than a decade and government debt has more than tripled to more than 2.2 trillion pounds in the last 12 years of the Conservative Party administration. 

     

    Hong Kong Stocks Rebounds

    Markets in Asia advanced on the back of a surge in New York and Europe on the hopes that the Federal Reserve may slow or pause rate hikes in the coming months. 

    Mainland China markets were closed for a week of holiday but the Hang Seng index in Hong Kong surged 5.9% to 18,087.97 as markets reopened after Tuesday's holiday.

    The Nikkei 225 Index increased 0.5% to 27,120.53, crossing the key 27,000 level for the first time in two weeks. 

    Markets in India were closed for the celebration of Dusserah and rupee edged up 27 cents to 81.51 against the U.S. dollar. 

    Benchmark indexes in Korea gained after consumer inflation eased for the second month in a row in September. 

    The Kospi added 0.3% to 2,215.22 and closed higher for the second day in in a row led by tech stocks.