Stock Market Today: Dow Holds Steady Amid Bond Yield Surge, China

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U.S. stocks’ recent rebound appeared to have taken a pause on Friday, as major indexes were little changed. Elsewhere, bond yields continued to climb and cryptocurrencies sold off.

By afternoon, the

Dow Jones Industrial Average
was nearly unchanged, after the benchmark rallied 506 points on Thursday. The

S&P 500
was also hovering around the flatline, while the

Nasdaq Composite
declined 0.2%.

“Monday’s declines were overdone and we’re inclined to think the two days bounce back is equally overdone,” wrote Tom Essaye, founder of Sevens Report Research.  

U.S. indexes have taken a more-than-3% round trip this week, after a Monday-Tuesday selloff as investors grappled with uncertainty about China Evergrande Group, Federal Reserve policy, and more.

U.S. Treasury bond yields are surging as global demand seems to be down for the moment. Global bond investors often pile into higher yielding U.S. debt when yields around the globe remain low, sending the price of U.S. debt up and yields down. That trade has reversed of late.

The yield on 10-year note climbed to as high as 1.46% Friday—its highest since July, but still well off the 1.75% peak from March 2021. The yield was hovering around 1.32% earlier this week. This comes after the yield on the U.K. 10-year Gilt has risen to 0.84%, after hovering around 0.7% to start the week. The rise makes U.S. debt slightly less attractive and was spurred by the Bank of England’s indication that it may hike interest rates as soon as the first quarter of 2022.

“The hawkish Bank of England meeting was the catalyst for the move higher in yields and we know that because 10-year GILT yields surged and pulled Treasury yields higher,” Essaye said.

Surging long-term bond yields put an outsized dent into valuations for growth companies because those firms are valued on a relatively long-term basis. Not only was the technology-heavy Nasdaq falling, but the

Russell 2000 Growth Index
was down 0.3%.

Still, the move down in growth stocks was minor. One factor investors will watch next is “the speed with which rates rise,” said Hank Smith, head of investment strategy at Haverford Trust. “If that 10 year hits 2% by year-end, either the economy better be booming like it was in the second quarter or the equity markets are not going to take that very well.” 

Although the major indexes were down, it…