Bond Slide Takes Wind Out of Stocks Amid Fed Angst: Markets Wrap

A renewed slide in Treasuries weighed on stocks, with investors awaiting Jerome Powell’s speech later this week for clues on the outlook for Federal Reserve policy.

(Bloomberg) — A renewed slide in Treasuries weighed on stocks, with investors awaiting Jerome Powell’s speech later this week for clues on the outlook for Federal Reserve policy.

The S&P 500 struggled for direction. Most of its major groups fell, but a rally in some megacaps like Tesla Inc. and Nvidia Corp. propped up the gauge. Bonds resumed their selloff as signs of economic strength bolstered bets on still elevated rates. The yield on 10-year inflation-protected Treasuries pushed over 2% for the first time since 2009. Not long after, the yield on 10-year notes without that protection hit a level last seen in late 2007.

Powell will speak Friday at the Kansas City Fed’s Jackson Hole Economic Policy Symposium. Investors will look to the highly anticipated speech after officials last month lifted rates to a range of 5.25% to 5.5%, the highest level in 22 years. Minutes from the gathering showed policymakers still saw significant risks that inflation could remain higher than they expect — which could keep rates elevated.

“Traders will be sifting every sentence from Jerome Powell at this week’s Jackson Hole conference for clues about the Fed’s disposition,” said Chris Larkin, managing director of trading and investing at E*Trade from Morgan Stanley. “Some investors may have focused on the reality that this economic resilience may extend the Fed’s higher-for-longer stance on interest rates.”

In fact, two-thirds of 602 respondents in Bloomberg’s latest Markets Live Pulse survey say the Fed has yet to conquer inflation. And over 80% of those surveyed said Powell’s Jackson Hole speech will reinforce the message of a hawkish hold.

“The Fed and investors will soon pivot from a focus on how high the policy rate will go to a concern about how long they will stay at that level — and what the implications are for a ‘higher for longer’ scenario,” said Katie Nixon at Northern Trust. “In our view, Powell will want to stay on message, and will try to push back against a growing market consensus that rate cuts are on the 2024 horizon.”

The speeches from Fed chiefs at the Jackson Hole conference have typically buoyed stocks since the turn of the millennium, with the S&P 500 gaining 0.4% on average in the following week, data compiled by Bloomberg Intelligence show. 

But last year’s appearance is still fresh in traders’ minds: Equities slumped 3.2% in the week following Powell’s remarks, according to BI, after he warned of keeping policy restrictive to battle inflation.

Meantime, two of Wall Street’s top strategists are at odds about the outlook for US stocks following a three-week run of declines as debate rages over whether the economy can avoid a recession.

While Morgan Stanley’s Michael Wilson — a stalwart equity bear — says sentiment is likely to weaken further if investors are starting to “question the sustainability of the economic resiliency,” his counterpart at Goldman Sachs Group Inc., David Kostin, says there’s room for investors to further increase exposure if the economy stays on course for a soft landing.

In other corporate news, Nikola Corp. slipped after the maker of electric big rigs warned it may not reach its full-year delivery target as it grapples with fallout from recent battery incidents. Broadcom Inc.’s $61 billion takeover of VMware Inc. was cleared by the UK’s antitrust watchdog, paving the way for one of the largest-ever tech deals. Cybersecurity firm Palo Alto Networks Inc. surged after projecting stronger billings for the year than Wall Street anticipated.

Key events this week:

  • US existing home sales, Tuesday
  • Chicago Fed’s Austan Goolsbee speaks, Tuesday
  • Eurozone S&P Global Services & Manufacturing PMI, consumer confidence, Wednesday
  • UK S&P Global / CIPS UK Manufacturing PMI, Wednesday
  • US new home sales, S&P Global Manufacturing PM, Wednesday
  • US initial jobless claims, durable goods, Thursday
  • Kansas City Fed’s annual economic policy symposium in Jackson Hole begins, Thursday
  • Japan Tokyo CPI, Friday
  • US University of Michigan consumer sentiment, Friday
  • Fed Chair Jerome Powell, ECB President Christine Lagarde to address Jackson Hole conference, Friday

Some of the main moves in markets:


  • The S&P 500 rose 0.1% as of 12:42 p.m. New York time
  • The Nasdaq 100 rose 0.9%
  • The Dow Jones Industrial Average fell 0.4%
  • The MSCI World index was little changed


  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.3% to $1.0901
  • The British pound rose 0.1% to $1.2752
  • The Japanese yen fell 0.5% to 146.18 per dollar


  • Bitcoin fell 0.9% to $25,984.68
  • Ether fell 1.8% to $1,658.88


  • The yield on 10-year Treasuries advanced eight basis points to 4.33%
  • Germany’s 10-year yield advanced eight basis points to 2.70%
  • Britain’s 10-year yield advanced five basis points to 4.73%


  • West Texas Intermediate crude was little changed
  • Gold futures rose 0.1% to $1,919.30 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Brett Miller, Tassia Sipahutar, John Viljoen, Sagarika Jaisinghani, Isabelle Lee and Heather Burke.

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