US stocks fall as Treasury yields rise

Nine of the 11 S & P 500 sectors fell, with the advanced technology and consumer discretionary sectors among the biggest losers. Interest-sensitive sectors, such as real estate and consumer staples, also declined. Rising bond yields may reduce the attractiveness of high dividend stocks.

Some of the biggest names in technology have come under pressure, with Google parent

Alphabet

and

Netflix

down more than 3%.

Facebook

and

Amazon.com
,

meanwhile, lost more than 2% while

Apple

was down about 1.5%.

Consumer-driven actions, such as

Nike
,

Home Depot

and

Procter & Gamble

were among Dow's largest consumers, with a loss of about 2%.

"We believe that Thursday's market action only matches market expectations, which are in line with the Federal Reserve's forecast, as well as the strength of the US economy relative to the rest of the world "said Lisa Erickson, director of Traditional Investment. Group with US Bank Wealth Management. "As the Fed continues to raise interest rates, this will make it more difficult for sectors such as real estate and utilities that have traditionally been bought more based on performance."

Bond yields jumped over the past week, with data pointing to a robust US economy and investors expressing relief from easing trade tensions in North America. Another proof of the strength of the US economy will probably come Friday, when investors will get a glimpse of the job situation in September.

"Recent data has shown that Americans are confident enough to find a job," said Christopher Ryon, a portfolio manager at Thornburg Investment Management. "It helps to reduce unemployment and I expect to see wage pressures rise. At that point, I expect more pressure will be put on inflation and, therefore, on interest rates. "

The 10-year US Treasury yield, which marks the risk climate worldwide, was recently at 3.198%, against 3.159% on Wednesday, its highest level since July 2011. Bond prices fall as yields rise .

While the American treasures were hit by sales pressure, yields have risen around the world. The yield on 10-year Japanese government bonds reached its highest level since January 2016. The yield on the ten-year British government debt, called gilts, had reached its highest level since before the country voted to leave the European Union in 2016.

Yet even when investors sold bonds, equity markets fell. Stocks often follow more and more yields on government bonds, while investors are banking on stronger growth to move from safer assets to riskier assets, analysts said. But after a period of low interest rates during which investors have accumulated riskier assets, the shares are more expensive than sovereign bonds, according to Sophie Huynh, multi-asset strategist at Société Générale.

In the foreign exchange markets, the WSJ Dollar Index – which tracks the dollar against a basket of 16 other currencies – has recently fallen by 0.1%, although it has remained on the rise for the week.

Recent dollar gains are due in part to Fed Chairman Jerome Powell's comments that the country's economy was experiencing "a remarkably positive set of economic circumstances."

This followed news earlier in the week that Canada had joined the United States and Mexico to successfully renegotiate the North American Free Trade Agreement, easing global trade concerns in recent months. Some analysts fear however that calm does not last, as the Trump administration should refocus its attention on its trade dispute with China.

While the world's two largest economies have imposed a series of import duties on reciprocal goods in recent months, "the market is now waiting to see if we will get the second round of tariffs on Chinese products that the Trump administration threatens, "said Mihir. Worah, CIO's asset allocation and actual performance at Pimco. "I think we're probably going to have an escalation, which would not be great for the markets, although we can get back or agree later."

In commodities, US crude oil fell 1.3% to $ 75.42 a barrel. The recent surge in oil prices has also boosted yields, said David Hauner, Head of EEMEA's cross-asset and economic strategy at Bank of America Merrill Lynch.

Write to David Hodari at [email protected]