Market Snapshot: U.S. stocks fall for 4th day as oil prices rise and recent rise in Treasury yields pressures global markets

What’s driving markets

Global stocks took a beating this week as the 10-year U.S. Treasury yield climbed to its highest level in 16 years, and traded on the verge of 5%, raising borrowing costs which could could put more pressure on economic growth.

Treasury yields backed off a bit on Friday, but the impact of their rise from earlier in the week was still being felt, sources said.

“The stock market now is glued to the bond market. We’ve hit the point where long-term yields are essentially the No. 1 problem for everything,” said Michael Lebowitz, a portfolio manager at RIA Advisors.

The yield on the 10-year note
BX:TMUBMUSD10Y
was down 9.5 basis points at 4.893% on Friday, but has risen more than 25 basis points so far this week, according to Dow Jones Market Data.

Read: Why stock-market investors are fixated on 5% as 10-year Treasury yield nears key threshold

Investors also remained focused on comments by Federal Reserve officials after Federal Reserve Chairman Jerome Powell gave a cautious outlook the economy during a speech in New York on Friday. During an interview with CNBC on Friday, Atlanta Fed President Raphael Bostic said he didn’t expect the Fed to cut interest rates until late 2024.

Markets judged that while Powell’s seemed to suggest that there wouldn’t be another interest rate hike following the Fed’s upcoming meeting, his optimistic view on the U.S. economy seemed to imply that rates won’t be coming down any time soon, which helped send stocks lower in afternoon trading on Thursday.

“Jay Powell seemed to confirm that the FOMC will be ‘on hold’ on November 1, an outcome that swap markets have already anticipated. But he was also ‘hawkish’ insofar as he was optimistic trend US growth. He gave little indication that he’d contemplate a cut in the policy rate, or the conditions under which it would happen,” said Thierry Wizman, Macquarie’s global currency and interest rates strategist.

Cleveland Fed President Loretta Mester will speak at 12:15 p.m. Eastern Time. She is set to be the last Fed official to deliver public remarks ahead of the central bank’s upcoming policy meeting.

The near two-week war between Israel and Hamas has also weighed on investors, with oil prices up again Friday. Investors were wary of further escalation via a possible ground invasion by the Israeli military. Palestinians in Gaza reported heavy strikes in the southern region where they had been told to evacuate on Friday, with a large Israeli town in the north near the Lebanese border also evacuating.

West Texas Intermediate crude
CL.1,
+0.82%,
the U.S. oil benchmark, rose 1.2% to $90.40 a barrel. Meanwhile, gold futures due in December
GC00,
+1.15%
climbed to $25 to $1,993.30 an ounce.

On the corporate earnings front, investors received reports from American Express Co.
AXP,
-3.34%
and others, but most are looking ahead to next week, when Alphabet
GOOGL,
-1.10%,
Microsoft
MSFT,
-1.21%
and Amazon.com
AMZN,
-1.88%
will report. Their shares have been among an elite group of stocks that has been responsible for much of the S&P 500’s advance in 2023.

As stocks dropped on Friday, the Cboe Volatility Index
VIX,
known as the Vix or Wall Street’s “fear gauge,” climbed to 21.80, its highest level intraday since March 27, FactSet data show. Traders have been on the lookout for surging volatility as options with $2.5 trillion in notional value expire on Friday. Notional value references the aggregate value of the underlying assets that options contracts are tied to.

Companies in focus

• Regions Financial Corp.‘s RF stock dropped after the bank’s third-quarter profit and revenue missed expectations, as total loans increased but deposits fell and as the regional banking industry faced “economic and regulatory uncertainty.”

• Hewlett Packard Enterprise Co. 
  HPE,
  -6.35%
  fell after the firm’s fiscal forecast fell short of analysts’ expectations.

• American Express was steady after easily topping profit expectations for its third quarter, while calling out healthy spending and “strong” credit metrics.