Stocks opened lower again on Tuesday as the recent uptick in bond yields continued to put pressure on the market.
The Dow Jones Industrial Average was down 115 points, or 0.3%. The S&P 500 was down 0.4%. The Nasdaq Composite was down 0.5%.
The yield on the 2-year Treasury note remained above 4% but was down a tick to 4.035%. The 10-year yield was at 4.182%. Yields have risen in recent weeks.
“Treasury yields remain the culprit as the relentless rise in longer-term interest rates continues since the Fed cut rates in September,” writes Bespoke Investment Group co-founder Paul Hickey. “The 10-year yield has risen above 4.2% for the first time since the summer as the market continues to experience one of the sharpest increases in yields following a rate cut in at least the last 30 years.”
Some analysts have noted the 10-year yield has moved in line with former President Donald Trump’s odds of winning the 2024 election.
“While one may think this explains the uptick in yields in the US, why have the European 10 years gotten smoked?” writes Andrew Brenner, head of international fixed income at NatAlliance Securities.
The latest round of earnings results have been so-so, but some of the biggest names in the S&P 500 have yet to report. Tesla, for example, will kick off Magnificent Seven results after the market closes tomorrow.
The stock market has suddenly lost some momentum as earnings season rolls on and the 2024 election looms. BofA Global Research equity and quant strategist Jill Carey Hall wrote in a note on Tuesday that BofA Securities hedge fund, institutional, and retail clients were all net sellers last week despite gains for the big three indexes. Clients were net sellers of U.S. stocks by $3.7 billion.
“Clients sold single stocks but bought ETFs,” she wrote. “Outflows were seen in large and mid caps; small caps saw inflows.”
Of the major sectors, tech, financials, and industrials saw the highest outflows. The only sectors to see inflows last week were communication services, real estate, and materials.