Dow Jones Industrial Average fades a soft-inflation bounce as yields climb
The 10-year Treasury yield rose to near 5.30% on Wednesday, its highest since 2007, on the same day US inflation came in under forecast. The Dow Jones Industrial Average rallied on the inflation release, faded for the rest of the session and closed on its low, just under 51,000.
On Wednesday, the 10-year Treasury yield rose to a near 5.30% level, its highest since 2007, while US inflation came in at a lower-than-expected rate. The Dow Jones Industrial Average initially rallied on this inflation release but then faded for the remainder of the trading session, closing at a three-month low just under 51,000.
This marked the index's lowest close since mid-March. September saw the Dow Jones Industrial Average lose 4.3%, compared to a 0.5% decline for the S&P 500. Over the third quarter, the index experienced a 2.7% loss, while the S&P 500 and the Nasdaq Composite both gained. The broader decline in the Dow was about eight times greater than that of the broader market index in September.
The Consumer Price Index (CPI) rose by 0.2% in August, which was lower than the anticipated 0.3%, and the annual inflation rate remained at 3%. Futures markets adjusted their projections for an October Federal Reserve rate hike from about 51% to 35%, according to CME's FedWatch tool. Despite this change in sentiment, a December rate hike is still expected.
Other notable data released on Wednesday included a payroll count of 90,000 from Automatic Data Processing (ADP), surpassing the 70,000 forecast, and a Purchasing Managers Index (PMI) of 58.8, an increase from the previous 47.1. As a result, traders sold Treasuries due to the higher 10-year yield, which in turn impacts mortgage, car, and business loan rates that affect the Dow's industrial and consumer sectors.
The Federal Reserve's official stance on inflation remains a significant factor affecting the index's performance.
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