October began with a familiar pattern, reflecting the turbulence seen in September. Once again, the significant increase in Treasury yields has become the main focus, creating a sense of uncertainty and unease among traders.
The 10-year Treasury yield has risen to 4.70%, while the 30-year yield has surpassed the 4.80% level, both increasing by 10 basis points in a single day. This has resulted in a nearly 2% drop in the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT), reaching its lowest point since August 2007.
At the same time, Federal Reserve Chair Jerome Powell and Philadelphia Fed President Patrick Harker engaged in conversations with various stakeholders in Pennsylvania, including workers, small business owners, and community leaders. Powell acknowledged that the U.S. economy is still dealing with the lingering effects of the COVID-19 pandemic, particularly in regards to labor shortages in healthcare, childcare accessibility issues, and other related challenges. However, Powell refrained from commenting on current monetary policy or the economic outlook.
Earlier in the day, positive data emerged regarding September’s manufacturing activity, as indicated by the ISM PMI and S&P Global’s PMI. This data has strengthened the U.S. dollar and increased expectations of a rate hike, highlighting the resilience of the U.S. economy. Traders are currently assigning a 30% probability of a rate hike during the November meeting, which rises to 45% for a rate hike by the December meeting.
In terms of stock market performance, major indices are mostly in the red, with the exception of the tech-heavy Nasdaq 100, which has seen a 0.2% increase. The S&P 500 index fell by 0.7%, while blue-chip stocks in the Dow Jones dropped by 0.8%. Small caps in the Russell 2000 index experienced a significant decline of 1.6%.
Various ETFs also saw changes in value. The SPDR S&P 500 ETF Trust (NYSE:SPY) fell by 0.7% to $424.78, the SPDR Dow Jones Industrial Average ETF (NYSE:DIA) dropped by 0.8% to $332.36, and the Invesco QQQ Trust (NASDAQ:QQQ) declined by 0.2% to $358.89.
Specific sectors within the S&P 500’s sector ETFs showed varying performance. The Technology Select Sector SPDR Fund (NYSE:XLK) and the Communication Services Select Sector SPDR Fund (NYSE:XLC) performed well, rising by 0.4% and 0.2% respectively. On the other hand, Utilities experienced a significant decline, with the Utilities Select Sector SPDR Fund (NYSE:XLU) falling by 5%, the most substantial one-day drop since March 2020. NexEra Energy Inc. (NYSE:NEE) also suffered a notable decline of approximately 10% following price target cuts by Wells Fargo and Goldman Sachs.
Other stocks that saw significant movement include Danaher Corp. (NYSE:DHR) with a 15% decline due to recent changes and target price reductions, Kellogg Co. which underwent a split resulting in sell-offs for both newly formed entities, and Z Scaler Inc. (NASDAQ:ZS) which rose by 3.4% after receiving a bullish note from Piper Sandler.
In terms of commodities, crude oil fell by 1.5% to $88.50 per barrel, while gold and silver saw declines of 0.8% and 4.3% respectively. The U.S. dollar slightly rose, and the EUR/USD pair fell by 0.7% to 1.0495. European equity indices closed in the red, with the SPDR DJ Euro STOXX 50 ETF (NYSE:FEZ) declining by 1.8%. Bitcoin (CRYPTO: BTC) also experienced a slight decrease of 0.2% to $27,929.