Bond Yields Hit Fresh Highs After Hot Retail Sales Data
U.S. government bond yields hit fresh decade-plus highs Tuesday after another hot economic-data release fueled concerns that interest rates could remain elevated for longer.
The latest retail-sales report showed spending online, at stores and in restaurants rose a stronger-than-expected 0.7% in September from a month earlier. Treasury yields jumped afterward, with the benchmark 10-year bond yield rising to 4.846%, up from 4.709% Monday. It was the highest closing level since July 2007.
Stocks wavered between gains and losses before closing little changed. The $S&P 500(.SPX)$
Higher bond yields are pushing up borrowing costs for companies, individuals and home buyers. But U.S. consumers are still on a spending binge that has helped sustain the economy.
Economic indicators have repeatedly surprised to the upside in recent weeks, prompting bond traders to reset expectations for how long the Federal Reserve will keep its monetary policy restrictive.
There is a plausible story that inflation is moving toward the Federal Reserve's 2% target, Richmond Fed President Tom Barkin said in remarks released before a Tuesday speech in Washington. The Federal Reserve still has time to determine whether another rate hike is necessary, he added.
Some investors expect higher long-term bond yields to help the Fed cool inflation without further rate increases.
Investors are also weighing the impact of a spate of Wall Street earnings and the Israel-Hamas war. Markets got a boost Monday on optimism that conflict in the Middle East had yet to escalate into a broader geopolitical crisis, after investors had piled into safer assets before the weekend.
In earnings, $Goldman Sachs(GS.US)$ and $Bank of America(BAC)$
Chipmaker shares came under pressure after the Commerce Department said it would significantly constrict exports of artificial-intelligence chips, making it tougher for companies like $NVIDIA Corp(NVDA)$
$Moderna(MRNA.US)$ shares fell sharply for a second day after the vaccine maker warned Monday that there is uncertainty over U.S. vaccination rates, making projections difficult. Moderna was the S&P 500's worst performer, dropping 6.1%.
$VF Corp(VFC.US)$, the owner of brands including Vans and The North Face, surged 14% higher after The Wall Street Journal reported that activist investor Engaged Capital has built a stake in the company and plans to push for changes, including steep cost cuts.
Overseas, stocks were mixed. The European Stoxx 600 edged lower, while Asian indexes were mostly up.
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