Wall Street started the fourth quarter in a jumpy mood, caught between rising borrowing costs and a resilient technology sector.
The 10 year Treasury yield, which moves inversely to bond prices and serves as a benchmark for everything from mortgage rates to corporate borrowing, climbed to around 5.34% on Thursday, its highest level since 2002. That is a striking milestone: for more than two decades, long term government borrowing costs in the United States had not reached that height. The move triggered heavy selling in rate sensitive sectors including banks and housebuilders, whose businesses depend on cheaper credit.
Oil added to the unease. Crude prices climbed toward the 100 dollar a barrel range after China's major refiners suspended most fuel exports for October, removing a significant supply of diesel, gasoline, and jet fuel from an already tight global market. Eurozone unemployment, meanwhile, held steady at 6.4% in September, in line with expectations, a signal that Europe's labor market has not deteriorated even as European equities traded lower on the same day.
Despite the pressure, major U.S. indexes mostly held their ground. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all opened Thursday higher, led by gains in artificial intelligence related stocks, before yields and oil prices pulled indexes down somewhat during the session. By Friday morning, some of that pressure had eased: the 10 year yield had retreated to around 5.25% overnight, and S&P 500 futures were pointing modestly higher as investors awaited the morning's jobs report, a number many expect to set the tone for how quickly, or whether, the Federal Reserve moves on interest rates from here.
A stronger than expected jobs number could revive expectations of tighter Federal Reserve policy and send yields back toward Thursday's highs. A softer number could help yields retreat further and support the rate sensitive stocks that have struggled this week.
Why are Treasury yields rising?
Investors have been demanding higher returns on long term government debt, pushing the 10 year yield to levels last seen in 2002, which raises borrowing costs across the economy.
Why does China halting fuel exports affect oil prices everywhere?
China is one of the world's largest refiners, so pulling its diesel, gasoline, and jet fuel exports off the market tightens global supply and pushes prices higher.