How High Can Bond Yields Go Before Crashing the Nasdaq 100?
Earlier this week, US 10-year yields reached 4.36%, the highest point in over a decade. This comes as part of a medium-term upward trend that began in April of this year, fueled by both fundamental and technical factors.
The market's concern about rising inflationary pressures and their impact on monetary policy is the primary driver behind the bonds' rally. Currently, the probability of another hike is increasing and is already above 40% for the Fed's November meeting.
As a result, US stock indexes are having a challenging week, and yesterday's weak trading session could potentially further reinforce the downward trend — despite the highly positive surprise in Nvidia's (NASDAQ:NVDA) earnings.
However, the final verdict for the weeks ahead remains uncertain until the culmination of the Jackson Hole symposium later today and Federal Reserve Chair Jerome Powell's speech.
The U.S. bond market is sending a clear signal that the fight against inflation may be much more challenging than previously expected. Although the 10-year has rebounded lower in recent sessions, the upward trend is still in effect.
The latest CPI readings were slightly better than forecast but showed the first monthly y/y increase since last July.
This indicates that even though there was solid advancement in the first half of the year, achieving the 2% target will be akin to climbing an 8,000-meter peak. As you ascend, gaining additional meters—here, percentage points—becomes progressively harder. If upcoming readings confirm the trend reversal, it might lean towards another interest rate hike.
Apart from GDP, the main factors that indicate the well-being of an economy, namely the services and manufacturing PMIs, are still giving us no reason to feel
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