The yield of US treasury bond bonds rose further on Wednesday as the market continued to digest the US inflation data on Tuesday, which had an impact on the prospect of the Federal Reserve's interest rate cut within the year. As US bond yields continue to rise, growth stocks in the US are also gradually feeling pressure - the three major US stock indexes fluctuated overnight, and technology stocks showed a significant decline.
Market data shows that the yield of US Treasury bonds with different maturities generally rose overnight. As of the end of the New York session, the 2-year US Treasury yield rose 5.4 basis points to 4.649%, the 5-year US Treasury yield rose 4.7 basis points to 4.204%, the 10-year US Treasury yield rose 3.3 basis points to 4.193%, and the 30-year US Treasury yield rose 2.7 basis points to 4.343%.
This is the third consecutive trading day that the 10-year US Treasury yield, which has a global asset pricing anchor, has risen. Previously, a report released by the US Department of Labor on Tuesday showed that the Consumer Price Index (CPI) in February increased by 0.4% month on month, higher than expected, mainly due to the impact of rising gasoline and housing costs.
According to CME Group's Federal Reserve observation tool, traders in the interest rate futures market have lowered their bets on the Fed's rate cut in June from 70% on Tuesday to 66.7%. Due to the current period of silence before the March interest rate meeting, there are no planned speeches from Federal Reserve officials on this week's financial calendar.
Jack McIntyre, Global Fixed Income Portfolio Manager at Brandywine Global, said, "This is a common trend since December - there is a constant struggle between market expectations of what the Federal Reserve will do and the Federal Reserve's own expectations."
The market has been closely monitoring new data that reflects the trajectory of US economic growth recently, which can provide guidance for the central bank's interest rate reduction plan. Tuesday's CPI and a series of previous reports have undoubtedly raised concerns among many industry insiders about the rebound in inflation.
McIntyre pointed out, "The timing and speed of (inflation) is a bit discouraging, but I still believe things are moving in the right direction."
The latest data released by the American Mortgage Bankers Association on Wednesday showed that in the week ending March 8th, the number of mortgage applications increased by 7.1% compared to a week ago. McIntyre believes that this has also intensified market concerns that the Federal Reserve may lower interest rates more slowly than previously expected.
In the stock market, the S&P 500 index fell overall on Wednesday, dragged down by the decline in technology stocks. The benchmark index ultimately fell by 0.2%, setting a record high for the 17th time this year just the day before. The Nasdaq Composite Index, which is concentrated in technology stocks, fell 0.5% on Wednesday, with only the Dow Jones up 38 points or 0.1%.
Four out of the 11 sectors in the S&P 500 index fell. The best performing information technology stocks this year and last year led the decline, falling 1.1%. Some analysts said that the overall rise in the yield of US treasury bond bonds has put pressure on interest rate sensitive large enterprises such as Nvidia, Meta and Apple, which fell between 3.1% and 0.9%.
Regarding the current situation of the US stock market hitting new highs multiple times this year, Seven Report founder Tom Essaye said that the current pattern reflects the driving factors that have driven the stock market higher this year: steady profit growth, the prospect of Fed rate cuts, and enthusiasm for artificial intelligence. "However, although the fundamentals are positive, they still cannot prove that the current valuation is reasonable - this makes the market vulnerable to negative surprises."
Tonight, we will fight the "data wave" again
For Wall Street traders, the next key data wave to focus on will emerge tonight - including the Producer Price Index (PPI) for February and retail sales, known as "terrifying data," as well as the latest initial unemployment claims for the week ending March 9th.
Industry analyst Estelle Ou said that after the booming CPI data, PPI may also rise due to the rebound in energy prices. She pointed out that more importantly, the components of the Federal Reserve's preferred inflation indicator, the core PCE index, may maintain a partial upward trend from January, which poses an upward risk to our current core PCE estimates.
FHN Financial's Will Compernolle said, "We believe that US bond yields may further rise before next Wednesday's Federal Reserve decision, especially if Thursday's PPI unexpectedly rises. If market participants really don't care much about yesterday's hot CPI, then next week's dot matrix and press conference will become the next potential catalyst for setting new interest rate anchors."
In the view of Jose Torres from Interactive Brokers, Tuesday's CPI data has increased the importance of the interest rate chart released by the Federal Reserve next Wednesday. Investors currently expect the Federal Reserve to cut interest rates for the first time in June and two more times before the end of the year.
Torres pointed out that the Federal Reserve's grid chart will provide insights into the degree to which these market expectations align with reality. Some members of the Federal Reserve have previously hinted that one to two rate cuts this year may be sufficient, rather than the market's expected three.