(CercleFinance.com) – The New York Stock Exchange is expected to continue its decline on Friday after having already fallen significantly this week, amid fears about further interest rate increases from the Federal Reserve.
Around 8:15 a.m., futures contracts on the S&P 500 and Nasdaq indices fell between 0.3% and 0.4%, announcing the start of the session in negative territory.
The stock market week – which had started rather well – seems about to end much less favorably given the context of persistent tensions on bond yields.
The yield on 10-year Treasuries, which has continued to rise for six months, reached a new 16-year peak this morning, at 4.99%, dangerously approaching the critical threshold of 5%.
This surge of pressure can be explained by the strong economic indicators published recently, which triggered the rise in real rates by raising fears of a new monetary tightening on the part of the Fed.
The president of the institution, Jerome Powell, himself recalled yesterday the central bank’s desire to bring inflation back towards its 2% objective.
As a result, investors have revised upwards the probability of seeing the central bank increase its rates again in December, which was estimated at nearly 30% yesterday according to the CME Group’s FedWatch barometer.
The CBOE VIX volatility index has reached levels not seen since March.
Until now, Wall Street had managed to rise despite the steady rise in bond yields, but the psychology of the market now appears to have changed.
‘The markets which had recorded key rates between 3% and 4% are starting to worry about levels which could reach between 5% and 6%’, explains a trader.
“And to top it all off, war in the Middle East is becoming a significant probability and is creating a climate of major and multiple uncertainties,” adds the professional.
Wall Street’s rout is prompting safety buying in safe-haven assets, such as gold and the dollar.
The oil market is not spared from stock market ups and downs, with a barrel of light American crude (WTI) climbing 1.2% to $90.5, with investors remaining sensitive to any upheaval in the Middle East.
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