US stocks fell as bond yields rose and the Middle East situation worsened. The 10-year Treasury yield exceeded 4% for the first time since August, putting pressure on stock indices. Investors are focusing on upcoming Fed meeting minutes, CPI data, and corporate earnings this week.
The Dow Jones dropped 219.22 points, or 0.52%, to 42,133.53; the Nasdaq slipped 64.79 points, or 0.36%, to 18,073.06; and the S&P 500 fell 19.03 points, or 0.33%, to 5,732.04. The 10-year Treasury yield rose to 4.029% following a surge in non-farm payrolls last week, adding pressure to the stock market.
Tensions in the Middle East also weighed on US stocks as Israel conducted airstrikes on Lebanon and Gaza on the anniversary of a major attack, with Israeli defense minister vowing retribution against Iran. Rising oil prices added to the market's woes, with US WTI crude futures increasing more than 2%, surpassing $76 per barrel.
Last week, major US indices rose slightly, marking a fourth consecutive weekly gain. The S&P 500 increased 0.2%, the Nasdaq rose 0.1%, and the Dow also added 0.1%. The strong September non-farm payrolls report supported views of a possible "soft landing" for the US economy.
Markets are closely watching the Fed's rate path. With the largest increase in jobs in six months, unemployment down, and wages rising steadily, the outlook for Fed rate cuts has shifted. The market now anticipates only a 25 basis point cut in November, according to the CME FedWatch Tool, with a 95% probability.
Bank of America predicts the Fed will cut rates by 25 basis points at each meeting until March 2025, and continue quarterly cuts through the end of 2025. Keith Lerner from Truist Wealth highlighted the impact of the upcoming US presidential election on market volatility.
This week's highlights include the Fed's meeting minutes and CPI report, with earnings from Delta Air Lines and JPMorgan Chase set for release.
Key stocks in focus include Intel (INTC), with former Boston Consulting Group advisor predicting a significant revenue increase due to AI and new processors. Jefferies downgraded Apple (AAPL, Financial) to "hold," citing overestimated iPhone expectations and potential redesign delays. Meanwhile, Microsoft encouraged users to upgrade to Windows 11 by purchasing new computers, as Windows 10 support ends in 2025. Wells Fargo lowered its rating on Amazon (AMZN) to neutral due to oil-driven energy stock gains.
