Markets
Stocks declined last week as global investors fretted about oil-supply-induced inflation.
The Standard & Poor’s 500 Index declined 1.43 percent, while the Nasdaq Composite Index slid 2.05 percent. The Dow Jones Industrial Average slipped 0.85 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, lost 0.40 percent.¹˒²
Bond Yields Up, Stocks Under Pressure: The See-Saw
Bond yields spiked at the start of the week, putting a squeeze on stock prices. The yield on the 30-year Treasury bond hit a 19-year high.
Markets continued their slide on Tuesday as investors fretted over inflation. Yields on bonds around the world rose to multi-decade highs.³˒⁴
Stocks steadied, and bond yields fell midweek as investors responded to the Treasury Department’s announcement that it would buy back long-term debt to help stabilize interest rates. However, the Wednesday morning rally petered out as the session progressed into the afternoon.⁵˒⁶
Stocks rebounded to finish a tough week on a positive note despite rising oil prices.⁷
What Is the Bond Market Telling Us About the Stock Market?
Last week, yields on bonds issued by sovereign governments around the world rose to multi-year highs, including in Japan and throughout Europe.
Investors in these bonds decided they needed higher yields to compensate for ongoing global issues. As a result, the cost of borrowing money went up. And because bond prices and yields move in opposite directions, the value of these bonds fell.
The Treasury Department stepped in on Wednesday to say that it would double the size of its current repurchases of longer-term (10- to 30-year) Treasury debt. It’s uncertain how the move could influence markets.
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