Stocks can’t break out of their slump.
The Dow, in the middle of its longest losing streak in more than a year, fell 200 points at Wednesday’s open.
Even Boeing couldn’t help the market settle down. An optimistic forecast lifted Boeing’s stock 3%. It’s Dow’s best-performing company over the past two years.
The Dow has lost ground for five straight days. A 425-point rout on Tuesday sent the index back into negative territory for the year.
“2017 was a walk in the park. The park has now become more treacherous,” said Ed Yardeni, president of Yardeni Research.
Rising bond yields are putting pressure on an already vulnerable stock market that has been attempting to claw its way back from correction territory — 10% off the record high in late January.
The yield on the 10-year US Treasury note breached 3% for the first time in more than four years Tuesday morning. Long-term bond yields have been climbing in part because of inflation fears. Inflation eats away at the value of fixed bond payments, leading investors to demand a higher yield in return.
Car loans and mortgage prices are linked to the benchmark 10-year note, and rising yields will raise borrowing costs for companies and consumers. Higher yields in the bond market could also become more attractive than volatile stocks for many investors.
The 10-year yield inched up to 3.01% on Wednesday.
Higher commodity costs also worry investors because they dent profit margins and force companies to raise the price of goods on consumers.
On Tuesday, Caterpillar, an industrial bellwether, warned on its earnings call that margins wouldn’t get any higher and the last three months were its “high-water mark” for the year. Caterpillar lost 6% on Tuesday and sent a chill across the market.
Oil prices have marched toward $70 a barrel in recent weeks on geopolitical tensions in Syria and Iran. OPEC’s production cuts have mopped up a global oil glut that caused oil prices to crash to $26 a barrel in 2016.
The combination of higher yields in the bond market and oil prices have heightened expectations of inflation. When inflation rises, that raises the possibility that the Federal Reserve will hike interest rates at a faster pace to prevent the economy from getting too hot.
“Inflation fears have started creeping back,” said Lindsey Bell, an investment strategist for CFRA Research.
Corporate earnings have also failed to live up to lofty expectations so far.
“Traders and investors were expecting more positive guidance, but have been disappointed,” said Quincy Krosby, chief market strategist at Prudential Financial.
