Wall Street’s party hit a wall made of bonds. Stocks closed lower Wednesday as long-dated US Treasury yields resumed their climb, reviving fears about inflation and mounting debt one day after the S&P 500 and Nasdaq hit record closes, Reuters reports. Brent crude briefly crept above $100 a barrel and the 30-year Treasury yield touched a 24-year high.
The scoreboard, per Reuters’ preliminary data: the S&P 500 lost 0.23% to 7,801.15, the Nasdaq dropped 0.24% to 27,533.39, and the Dow fell 355.91 points, or 0.69%, to 51,165.37. Earlier in the session the 30-year yield was at 5.72%, the highest since 2002, according to Reuters via GV Wire; the Motley Fool had the 10-year at 5.31%. Caterpillar fell more than 6% after an analyst downgrade, and Webull tumbled 20% on reports a congressional committee raised concerns about its China connections.
Now the part that hits your kitchen table: the average 30-year fixed mortgage rate jumped to 7.49% from 7.30% — the highest in almost three years — and mortgage applications fell 4.2% in the week ending Oct. 2, the Mortgage Bankers Association said, per HousingWire. Refinance applications were 56% below a year ago. “Very few homeowners have an incentive to refinance at these rates,” said MBA deputy chief economist Joel Kan. Homebuilder stocks slid 2.9%, Reuters says.
Then the Fed dropped its homework. Minutes of the Sept. 15–16 meeting — where officials voted unanimously for a quarter-point hike to 3.75%–4.00% — show policymakers divided over why they hiked: some to keep energy and other price shocks from spreading, a more hawkish core to guard against demand-driven inflation, Reuters reports. “Most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” the minutes said.
Markets aren’t betting on October, though: traders price less than a 20% chance of a second straight hike at the Oct. 27–28 meeting, down from 37.6% a week ago, per CME FedWatch, Reuters says. Stocks pared losses after the International Energy Agency agreed to speed the release of oil stocks, prioritizing diesel.
Bottom line: oil up, yields up, mortgages up — and the only thing going down is the number of people who can afford a house.
Sources: Reuters (StreetInsider) · Reuters via GV Wire · HousingWire · Reuters on Fed minutes (Investing.com) · The Motley Fool
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