AE Wealth Management: Market Minute | 10/03/23
Markets drop as bond yields hit 16-year highs
Markets experienced increased volatility today, pushed downward as bond yields reached 16-year highs. Recessionary fears and uncertainty about the Federal Reserve’s next moves regarding interest rates seem to be fueling anxiety.
Congressional drama resulting from the fallout from the budget extension is also driving markets. Some members of the Republican caucus are calling for Speaker Kevin McCarthy to be removed from his position as leader of the House.
The latest jobs numbers were released today and seemed to add to the markets’ worries. The numbers don’t appear to be slowing, a factor that plays significantly into the Fed’s decision whether to pause or continue rate hikes. The Job Openings & Labor Turnover Summary (JOLTS) report showed we added 9.61 million jobs in August, and the high number has many thinking the Fed will likelyraise rates at least once more this year.
The market has finally figured out that high rates mean earnings may suffer, so corporate valuations are being reset. Technology companies’ earnings are most susceptible to higher rates; since the Nasdaq is made up of tech companies, it was affected the most by today’s spike in market volatility and dropped 2% before the bell. The S&P 500 and Dow Jones also pulled back significantly as the day went on.
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