October Opens on Modest Note as Treasury Yields Ease Back
Stocks opened October on a modest note, recovering from an initial drop as Treasury yields eased back. The S&P 500 (+0.2%), Nasdaq (+0.04%), and Dow Jones Industrial Average (+0.04%) all saw slim gains, but the broader market performed better, with the equal-weighted S&P 500 (+0.5%), Russell 2000 (+0.5%), and S&P MidCap 400 (+1.1%) seeing welcome breadth improvement.
The key driver behind the yield reversal was the 10-year Treasury hitting an intraday high of 5.34% (its highest since 2002) before settling at -6bp to ~5.24%. The 30-year Treasury also saw a decline, falling -2bp to 5.60% in cash trading.
The front-end market saw the biggest move, with the 2-year falling 10bp to ~4.79%, aided by Fed Vice Chair Jefferson's comments on further rate hikes 'may take more time'. The odds of an October hold rose to ~72% from ~62% (CME FedWatch).
Despite the positive market sentiment, oil prices remained a drag, with WTI +2.7% to ~$93 following reports of increased military presence in the Middle East.