MSCI’s gauge of stocks across the globe slipped 3.66 points, or 0.43%, to 843.74, on track for its fifth decline in six sessions
A gauge of global stocks dropped on Monday and U.S. Treasury yields jumped, with the benchmark 10-year note topping 4%, as investors readjusted their views for the path of interest rates from the Fed.
The U.S. 10-year note jumped to 4.033%, its highest since August 1 and first time above 4% since August 8 after Friday’s stronger-than-expected U.S. payrolls report fuelled expectations the Federal Reserve will dial back its aggressiveness in lowering interest rates.
Expectations for a Fed rate cut of 25 bps at the central bank’s November meeting stand at 84.6%, with the market pricing in a 15.4% probability it will hold rates steady, shows the CME’s FedWatch Tool.
Markets were completely pricing in a cut of at least 25 bps just a week ago, with a 34.7% probability for another outsized 50 bp cut after the Federal Reserve began cutting rates at its September meeting with a 50 bp cut.
The market very quickly flipped from talking about a 50 bp cut to possibly no cut in November, just based on the strength of the data, according to Gennadiy Goldberg, chief U.S. rates strategist at TD Securities.
It would be very strange for them to give up the ghost on additional cuts this soon after a 50 bp rate cut, Goldberg added.
On Wall Street, stocks closed lower, with energy the sole S&P 500 sector to post a gain as crude prices continued to rise on concerns a widening conflict in the Middle East could dent supply.
The DJIA dropped 398.51 points, or 0.94%, to 41,954.24, the S&P 500 skidded 55.13 points, or 0.96%, to 5,695.94 and the Nasdaq Composite stumbled 213.94 points, or 1.18%, to 17,923.90.
MSCI’s gauge of stocks across the globe slipped 3.66 points, or 0.43%, to 843.74, on track for its fifth decline in six sessions. In Europe, the STOXX 600 index closed 0.18% higher, erasing early declines, although gains were capped by rate-sensitive stocks such as real estate and utilities.
The yield on benchmark U.S. 10-year notes was last up 4.3 bps to 4.024%. The 2-year note yield, which typically moves in step with interest rate expectations, jumped 5.7 bps to 3.989% after rising to 4.027%, its highest since August 20.
A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 3.3 bps after briefly inverting for the first time since September 18.
