US equities end slightly lower as bond yields hold near multi-decade highs

On Tuesday (Sep 29), the US stock market closed marginally lower amid rising bond yields and investor scrutiny over forthcoming economic data and Federal Reserve comments. The 30-year US Treasury bond hit its highest since June 2002 at 5.6206 percent, while the benchmark 10-year bond climbed to 5.293 percent – its highest level since June 2007.

Shorter-duration yields fell on the day as oil prices retreated, driven by signs of a recovery in Middle East exports and remarks from Federal Reserve Bank of New York President John Williams. The Fed official suggested the central bank had time to assess the data before deciding on further rate hikes. Following Williams' comments, the expectation for a Fed rate hike of at least 25 basis points at the October meeting dropped to 51.5 percent, down from nearly 70 percent earlier in the session.

Oil price increases have fueled inflation concerns and pushed US Treasury yields higher. Fed officials hinted at potential additional rate increases if price pressures persist, despite a recent 25 basis point rate hike in September. Economic data releases, including the PCE Price Index on Wednesday and the government payrolls report on Friday, will provide insight into Fed policy.

Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, noted that higher yields could make bonds more attractive than equities, potentially affecting consumer-focused companies. The Dow Jones Industrial Average slipped 131.59 points, or 0.26 percent, to 51,349.92, while the S&P 500 and Nasdaq Composite both lost value, with the latter falling 0.08 percent to 26,797.54.

Job openings dropped 256,000 to 7.079 million in August, below the 7.225 million estimate, and consumer confidence plunged to a near 12.5-year low, reflecting concerns over the Iran war and rising interest rates.