To The Moon

Stocks Finish Lower For The Week, Deepening Their August Slump

Major U.S. stock indexes shed more than 2% this week, deepening their August slump, while Treasury yields touched their highest levels in years.

U.S. government bond yields on Friday fell back from Thursday's multiyear highs, but remained lofty enough to make investors think twice about betting on stocks to maintain this year's surprising rally.

$NASDAQ(.IXIC)$ packed with rate-sensitive technology stocks, fell 0.2% on Friday. $DJIA(.DJI)$  rose about 26 points, less than 0.1%, while the $S&P 500(.SPX)$  declined less than 0.1%. Every segment of the S&P 500 ended the week lower.

On the other hand, bond yields may have room yet to rise, he said, reasoning that they tend to peak just before the Federal Reserve reaches the end of rate-hike cycles. Kelley said.

What Drove Markets

Kelley said UMB analysts have concluded that 10-year Treasury yields greater than 4.75% seriously threaten stocks.

The 10-year Treasury yield declined to 4.251%, from 4.307% on Thursday, the highest closing level since 2007. The 30-year Treasury yield was 4.379%, down from Thursday's 12-year high of 4.411%. Bills from one month to one-year are paying more than 5%

More than a decade of piddly yields on government bonds led to the belief that "there is no alternative" worth investing in besides equities. Over the past year, investors have begun to rethink the TINA philosophy as the Fed has raised interest rates in hopes of taming inflation.

Money-market funds drew in almost $36 billion over the past week, their biggest inflow since May, as investors parked cash in sure bets on government bonds.

Mountains of money moving out of stocks and into bonds is one way investors expect higher interest rates to eventually end the rally in stocks that has sent the S&P 500 14% higher this year and the Nasdaq up 27%. The other threat comes from higher borrowing costs eroding consumers' spending power and corporate earnings.

On Friday, the biggest losers in the S&P 500 were sunk when they reported quarterly earnings and issued financial outlooks that disappointed investors.

$Keysight(KEYS)$  , which makes electronic test and measurement equipment such as oscilloscopes and digital multimeters, dropped 14%. $John Deere(DE)$   fell 5.3%.

Cosmetics giant $Estee Lauder(EL)$  , which shed 3.3% Friday.

$Ross Stores(ROST.US)$ was the S&P 500's top gainer. After Thursday's closing bell, the discount retailer rose 5% after posting better-than-expected earnings and boosting its second-half sales and profit outlooks. Executives said that cheaper ocean freight is helping margins, and lower inflation is giving its low- to moderate-income customers more to spend.

Commodity prices rose on Friday. Benchmark U.S. crude oil increased 1.1% to close at $81.25 a barrel. Soft-red winter wheat futures gained 3.9%. Soybean and corn futures added 1.7% and 1.5%, respectively. 

Hong Kong's Hang Seng Index lost more than 2%, falling into a new bear market, while stocks in Japan, Germany, France, and the U.K. also declined.

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