Booming Economy Brings Down Market Indexes
The US economy is experiencing a five-year high in business activity, but this good news has resulted in market indexes falling. The Nasdaq Composite dropped by 1%, and the S&P 500 and Dow Jones Industrial Average each fell by 0.6%. This may seem counterintuitive, but it highlights the market's current relationship with the Federal Reserve.
The Purchasing Managers' Index (PMI) rose to 58.4 in September from 56.0, indicating approximately 5% annualized growth. However, this growth is causing concerns about inflation and tighter monetary policy. The gauge of input prices jumped to 66.4, the highest since October 2022.
Bond traders reacted quickly to this news, with the 10-year yield increasing by 12 basis points to 5.087%, a level last seen in July 2007. October rate-hike odds shot above 73%. McDonald's and Alphabet dropped due to their own company-specific issues.