Markets slip as rising yields weigh on market sentiment

Dow declined 90, decliners over advancers better than 3-2 & NAZ was off 22.   The MLP index edged up to the 283s & the REIT index inched higher in the 429s after yesterday's sharp decline.  Junk bond funds were slightly lower & Treasuries had limited selling which lifted yields (more below).  Oil rose 1+ to the low 72s & gold jumped 19 to 2758 for another record.

Dow Jones Industrials

The US 10-year Treasury yield was on the move higher again after Federal Reserve officials urged caution on the path of interest rate cuts.  The yield on the 10-year Treasury rose more than 1 basis point to 4.174%.  Earlier today, it climbed above 4.2% for the first time in 3 months, after jumping 12 basis points yesterday.  The yield on the 2-year Treasury was just below flat at 4.024%, meanwhile.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Yesterday, Minneapolis Fed Pres Neel Kashkari said the longer-term trajectory for rates could be higher than it has been in the past, while Dallas Federal Reserve Pres Lorie Logan said a patient approach will be needed to lowering rates.  Kansas City Fed President Jeff Schmid also also a “cautious and deliberate” approach to rate cuts was appropriate after the Fed cut by a ½ percentage point in Sep.  Rates have actually increased since the Fed cut rates by a & point 1 month ago.  Strong economic data has been responsible for part of that gain, but so has uncertainty about how aggressive the central bank will be with rate cuts from here.  The market is pricing in a greater possibility that the Fed will only cut once thru the remainder of the year.  Traders see an 89% chance of a qtr-point cut at the Fed’s next meeting ending Nov 7. 

10-year Treasury yield tops 4.2% briefly

Much of the world has managed to successfully lower inflation & engineer an economic soft landing, avoiding recession, but faces rising geopolitical risks & weaker long-term growth prospects, according to the International Monetary Fund (IMF).  Global headline inflation will fall to 3.5% on an annual basis by the end of 2025, from an average 5.8% in 2024, the agency said in its World Economic Outlook.  Inflation peaked at a year-over-year rate of 9.4% in the 3rd qtr of 2022.  The yearend 2025 rate is slightly below the average annual rise in prices in the 2 decades before the Covid-19 pandemic.  “The global battle against inflation is almost won,” the IMF report trumpeted, even as it called for “a policy triple pivot” to address interest rates, gov spending & reforms & investment to boost productivity.  “Despite the good news on inflation, downside risks are increasing and now dominate the outlook,” said IMF chief economist Pierre-Olivier Gourinchas.  Now that inflation is headed in the right direction, global policymarkers face a new challenge stemming from the rate of growth in the world economy, the IMF warned.  The fund kept its global growth estimate at 3.2% for 2024 & 2025, which it called “stable yet underwhelming.”  The US is now forecast to see faster growth, & strong expansions are also likely in emerging Asian economies as a result of robust artificial intelligence-related investments.  But the IMF lowered its outlook for other advanced economies, notably the largest European nations, as well as several emerging markets, blaming intensifying global conflicts & ensuing risk to commodity prices.  The IMF, with 190 member countries, said in its overview that responsive monetary policy was key to bringing down inflation while labor market conditions normalized & supply shocks unwound, all of which helped avoid a global recession.  Central banks will need to remain vigilant in fully bringing down inflation, the report warned.  It added that services inflation still remains nearly double pre-pandemic levels as wages in certain countries continue catching up to an increase in the cost of living, leading several emerging market economies such as Brazil & Mexico to see an uptick in inflationary pressures.

IMF says global fight against inflation is ‘almost won’ but warns of rising risks

General Motors (GM) easily outperformed 3rd-qtr earnings expectations, leading the Detroit automaker in raising key guidance targets for 2024.  This marks the 3rd time this year that GM has updated its guidance after beating top- & bottom-line expectations, led by its North American operations.  GM is now forecasting full-year adjusted earnings before interest & taxes of $14-$15B ($10.00-$10.50 per share), up from $13-15B ($9.50 - $10.50 per share).  It also raised its adjusted automotive free cash flow forecast to $12.5-13.5B, up from $9.5-11.5B.  The automaker tightened its net income attributable to common stockholders, which excludes some div payouts, to $10.4-11.1B ($9.14-9.64 per share).  That compared to its previous guidance of $10-11.4B ($8.93-9.93 per share).  GM CFO Paul Jacobson warned earnings will be lower during the 4th qtr, citing timing of truck production, seasonality, lower wholesale volumes & vehicle mix, including selling more electric vehicles.  The automaker has topped EPS estimates for 9 consecutive qtrs & revenue for 8 straight qtrs.  “The consumer has held up remarkably well for us,” he said.  “Nothing we see has changed from where we’ve been for the last several quarters.”  The stock jumped 4.26 (9%).

GM raises 2024 earnings guidance after easily topping Wall Street’s third-quarter expectations

Stocks were sold as investors digested a recent bond-market selloff & braced for the next wave of earnings reports.  The stock market is coming under pressure amid growing doubts that the Federal Reserve will continue to cut rates aggressively, or even hold steady in Nov.  Strength in the economy, cautious Fedspeak & concerns about the fiscal impact of an election win by Rep nominee Donald Trump are factors in play.  Amid the uncertainty, the 10-year Treasury yield steadied around 4.2% after yesterday's sharp gains helped push it above that level for first time since Jul.