U.S. stocks fall as rising yields and geopolitical tensions weigh on markets

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16th April 2024 – (New York) U.S. equities closed lower on Monday, buffeted by increasing Treasury yields and escalating geopolitical uncertainties.

The Dow Jones Industrial Average dropped 248.13 points to settle at 37,735.11, a decline of 0.65 per cent. The S&P 500 retreated significantly by 61.59 points, ending the day at 5,061.82, which marks a 1.20 per cent fall. The technology-heavy Nasdaq Composite Index was the hardest hit, plunging 290.08 points to close at 15,885.02, a drop of 1.79 per cent.

The downturn was universal across the S&P 500 sectors, with technology and real estate experiencing the sharpest declines, down 1.99 per cent and 1.77 per cent respectively. The health sector saw the smallest reduction, decreasing by 0.19 per cent.

Treasury yields saw a notable rise, with the yield on the 10-year Treasury note climbing over 11 basis points to 4.616 per cent, reaching its highest mark since mid-November. The 2-year Treasury yield also rose, ending the day at 4.92 per cent.

This increase in yields comes in the wake of a Commerce Department report released Monday, indicating that retail sales in March exceeded expectations, increasing by 0.7 per cent against a forecasted 0.3 per cent rise. This robust consumer spending suggests sustained economic activity despite inflationary pressures.

The Federal Reserve’s potential monetary policy response remains a focal point. With inflation persisting, Fed officials have signalled a cautious approach to lowering interest rates. According to Andrew Hunter, Deputy Chief U.S. Economist at Capital Economics, the resilience in consumer spending and employment growth could mean a delay in interest rate cuts, possibly until September.

Market sentiment was further weakened by international events, as Iran launched an unprecedented attack on Israel from Iranian territory over the weekend, using drones and missiles. Although the immediate threat was largely neutralized, the incident has heightened fears of further escalations.

In corporate developments, Tesla’s stock fell sharply by 5.59 per cent following news of significant workforce reductions. Conversely, Goldman Sachs reported a robust first quarter, with a 28 per cent increase in profit driven by strong performance in investment banking and wealth management, surpassing expectations with net income reaching $4.1 billion and revenues up to $14.2 billion.