US: Stocks mixed as bond yields moderate
[NEW YORK] Wall Street stocks finished mixed on Thursday as US Treasury bond yields moderated following House passage of President Donald Trump's mammoth tax cut legislation.
A spike on Wednesday in yields on 10- and 30-year US bonds sent stocks sharply lower amid revived worries about a sell-off in US assets comparable to one earlier this spring before Trump retreated from some of his most onerous tariffs.
But bond yields retreated somewhat later on Thursday, boosting equities a little.
The Dow Jones Industrial Average finished flat at 41,859.09.
The broad-based S&P 500 lost less than 0.1 per cent at 5,842.01, while the tech-rich Nasdaq Composite Index climbed 0.3 per cent to 18,925.73.
The rise in yields had 'gone a little bit too far,' said Victoria Fernandez, chief market strategist at Crossmark Global Investments.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
The bill extends for 10 years tax cuts enacted under Trump's 2017 legislation, while enacting cuts to social safety net programs.
While investors welcome the tax cuts, they have been unnerved by forecasts that the proposal will add trillions of dollars in US debt.
Fernandez noted that the Senate will now weigh in on the bill, which could mean big changes.
'I still think we're quite a ways from seeing what actually happens,' she said.
Jack Ablin of Cresset Capital Management said the shift in the bond market also reflects short-term dynamics after Wednesday's poor US Treasury auction sent yields sharply higher.
'Investors are turning their attention back to the day rather than the structural dynamics,' Ablin said.
Among individual companies, Nike rose 2.2 per cent after announcing it will increase prices on many items in the United States next month, but did not blame President Donald Trump's tariffs for the move. AFP
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Times
an hour ago
- Business Times
Port of LA imports drop 19% in May as tariffs hit US businesses
Import volumes through the busiest trade hub in the US fell 19 per cent from the month before, a fallout from President Donald Trump's tariffs. 'It's very slow here seasonally,' Port of Los Angeles executive director Gene Seroka told reporters last Friday (Jun 13). Seroka warned that US businesses are facing high tariffs and uncertainty during what is typically the start of the peak season, and the consequences are likely to show up on store shelves in a few months. 'We've already blown past summer fashion and looking forward now to back to school and Halloween before the all important year-end holidays,' Seroka said. 'Cargo for those micro seasons needs to be here on the ground right now. I don't necessarily see that in inventory levels.' The drop in port activity came as importers and retailers – especially those with business in China – grappled with the uncertainty of Trump's trade war. Tariffs on goods from China were as high as 145 per cent in April, when many of the goods arriving in Southern California in May would have left Asian ports. In May, cargo handlers at the Port of Los Angeles processed a total of about 717,000 equivalent units, or TEUs. About 356,000 of those were imports, a 19 per cent drop compared to a month ago and 9 per cent lower than May 2024, Seroka said. Exports through Los Angeles fell to just over 120,000 containers, marking the sixth straight month of year-on-year declines as other countries responded with retaliatory tariffs, particularly for US agricultural goods, Seroka said. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up While import flows may pick up again as importers rush to bring goods in during a temporary agreement between the US and China to lower the highest of the tariffs, import levies on goods from China remain prohibitively high for many businesses. 'When all is said and done, buying products out of China right now still costs one and a half times more than it did earlier this year, making products of all types extremely expensive,' Seroka said. Despite the cancelled and delayed orders, importers still paid a record US$23 billion in customs duties in May, US Treasury data released last week showed. That translates to an average effective tariff rate of roughly 7.5-8 per cent, up from 2.5 per cent at the beginning of the year, according to Ernie Tedeschi, director of economics at Yale University's Budget Lab and a former Biden administration official. And there's still a ways to go before all of the tariffs announced by the Trump administration are implemented, Tedeschi said at the Port of Los Angeles briefing. 'We estimate that current policy is equivalent to a 15.5 per cent average effective tariff rate, including the new announcements for 2025 and the levels prior to them.' BLOOMBERG
Business Times
2 hours ago
- Business Times
Oil market, long numb to war risk, confronts weekend of worry
The past two years of escalating tensions in the Middle East have taught oil traders to be sanguine about the risk of disruption to oil supplies. The barrage of headlines has revived memories of the political upheavals and prices spikes of the 1970s – and yet even when oil prices have jumped, it inevitably proved short-lived. As Iran and Israel traded volleys of missiles in April last year and again in October, Middle Eastern oil continued to flow to the global market unaffected. Now, the latest assault by Israel is putting oil traders' nonchalance to the test. There's been no impact on supplies so far, but the strikes have shaken a market that for most of this year has been overshadowed by worries about a looming surplus driving down prices, with the Organization of the Petroleum Exporting Countries and its oil producing allies (Opec+) quickly unwinding production cuts and output rising elsewhere from Brazil to Guyana, while US President Donald Trump's trade war threatens demand. Even if many believe that the oil market may ultimately escape unscathed, the widespread uncertainty over how strongly Iran will respond, whether Israel will launch further attacks, and how the US will react is forcing traders to price in a huge range of possible outcomes. With hours left until the end of the trading week, few were brave enough to risk going into the weekend short. Brent futures spiked as much as 13 per cent early on Friday and settled 7 per cent higher at about US$74 a barrel. 'When there's a war on, you're not going to be short anything over the weekend,' said Andreas Laskaratos, chief executive officer of energy trading house AB Commodities. 'Although the fundamentals haven't changed, you can't trade against the headlines over the weekend.' BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Traders and analysts began to game out scenarios for possible escalation or de-escalation almost as soon as the first Israeli missiles hit Iran in the early hours of Friday morning. Laskaratos says his Europe-based traders were at their desks by about 4.30 am or 5.00 am. Analysts at Goldman Sachs raised their oil price forecasts for the coming months US$2-3 a barrel, but laid out possible scenarios ranging from a surge in prices above US$100 a barrel in the worst-case scenario, to a drop below US$50 next year in their most bearish scenario. 'The potential of further escalation in the Middle East implies that the short-term risks to our price forecast are now skewed to the upside,' the analysts including Daan Struyven wrote. Still, they maintained their call for prices to drop below US$60 by the fourth quarter of this year. A surge of trading in out-of-the money call options showed that many were seeking to hedge against the possibility of a price spike. Among the most traded options were call options that would pay out if prices rise above US$85 a barrel by Jun 25; a measure of the price of West Texas Intermediate (WTI) call options relative to the price of put options surged to the highest since March 2022, when the market was rocked by Russia's full-scale invasion of Ukraine. The most worrying possibility for the oil market is a disruption of shipping through the Strait of Hormuz, through which about one-fifth of global oil supply flows. Most analysts reckon that's unlikely. 'It is our understanding that it would be extremely difficult for Iran to close the strait for an extended period given the presence of the US Fifth Fleet in Bahrain,' said Helima Croft, head of global commodity strategy at RBC Capital Markets, and a former CIA analyst. Still, even if small, any increase in the chance of disruption is enough to drive prices. 'The possibility that the Strait of Hormuz closes is such a huge binary event, it makes forecasting balances challenging,' consultancy FGE NexantECA wrote in a report. 'Most market participants we have spoken to are not expecting the Strait of Hormuz to be closed; the consequences are just too great.' Other possible scenarios worrying oil traders include the possibility of strikes on Iran's oil infrastructure or the potential for sanctions against Iran to be ramped up if Teheran responds to the strikes by accelerating its nuclear programme. For now at least, most traders are viewing current events through the lens of recent history. 'For the past decade, events like this have been sell-the-rip situations. They didn't escalate. Fears were worse than what actually happened,' Dan Pickering, chief investment officer at Pickering Energy Partners, an energy-focused investment bank in Houston, wrote on X. The strikes may even turn out to be bearish. Trump on Friday called on Iran to make a deal or face 'even more brutal' attacks. If Teheran were to heed his advice, a nuclear deal would likely involve a relaxation of sanctions, potentially lifting Iran's exports. FGE NexantECA said that market participants were 'looking at the recent price action and starting to consider the events as a 'sell' opportunity'. 'However, they acknowledge that taking a short position right now is hard given the risk/expectation of further escalation in tensions in the weeks ahead.' Even if there is a disruption, Opec+ members Saudi Arabia and the United Arab Emirates have significant spare capacity that could be brought on to potentially help cool prices. 'It would take a lot of courage for someone to go against it but that said, we can't see this rally being sustained in the long term,' said Laskaratos of AB Commodities. 'We don't believe the fundamentals have changed on supply and demand as things stand.' BLOOMBERG
Business Times
3 hours ago
- Business Times
US dollar's tepid rebound reinforces questions around haven role
The US dollar's muted rally against major peers after Israel's strikes on Iran reinforced the impression that the greenback's role as a global haven currency is fading. A Bloomberg gauge of the US dollar gained as much as 0.6 per cent at one point on Friday (Jun 13) after Israel's attacks on Iranian nuclear facilities stoked fears of a wider conflict in the Middle East. However, the currency pared much of its advance and closed some 0.2 per cent higher in New York. The modest recovery leaves the greenback just above the three-year low it hit last week after President Donald Trump threatened fresh levies against global trading partners. The US dollar has slid during the past five months as Trump pushed ahead with tariffs, which have raised concerns over the US economic outlook and fuelled speculation that foreigners will shun American assets – the so-called Sell America trade. 'Middle East tensions are a risk to navigate rather than a game changer for the bearish dollar view,' JPMorgan strategists including Meera Chandan and Arindam Sandilya said to clients in a note on Friday. 'We do not expect the dollar impact to be more pronounced or durable than this at this stage.' The day's trading pattern was a far cry from decades past, when international crises would typically fuel gains in the greenback and Treasuries, long considered havens in part because of their liquidity and confidence in the US as a leader in the global economy. The 10-year US Treasury yield rose about five basis points on Friday as surging oil prices stoked inflation worries. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up There are some signs that the gloomy stance towards the US dollar is easing a bit. For example, options traders, while still broadly bearish on the US currency's prospects, have moderated their negative views in recent weeks and are banking on a pause in the greenback's sharp decline. 'The source of shocks to global risk and growth have been more concentrated in the US so far this year,' Goldman Sachs strategists Stuart Jenkins, Kamakshya Trivedi and Teresa Alves said in a report to clients on Friday. 'If that source were to shift more to the rest of the world, the dollar may resume trading with more safe-haven type characteristics.' The US' position as the world's largest oil producer likely helped to buoy the US dollar on Friday as crude futures soared, analysts said. So did the possibility of a squeeze in short positions against the greenback. The Bloomberg Dollar Spot Index has dropped about 8 per cent this year as Trump's efforts to overhaul global trade chipped away at investor confidence in the US economy. There are also projections that proposed tax legislation will add trillions of dollars to the federal deficit, while America's role in security and political alliances is being called into question as well. 'Dollar sentiment has taken a real hit,' Sonja Marten, DZ Bank's head of FX and monetary policy, told Bloomberg Television on Friday. It would take 'a complete escalation in the Middle East' to extend the US dollar's gains, she said. At cross-border payments firm Corpay, chief market strategist Karl Schamotta said the risk-off tone permeating markets reminded investors that the US dollar's losses this year are more a reflection of long-term growth concerns – and less so of any change in short-term demand for the liquidity of US assets. Before the attack, Wall Street banks were reinforcing their calls on further US dollar weakness. Paul Tudor Jones, the founder of macro hedge fund Tudor Investment, said the US currency may be 10 per cent lower a year from now as he expects to see short-term interest rates cut 'dramatically' in the next year. Hedge funds, asset managers and other speculative traders boosted their bets tied to the US dollar's decline to some US$15.9 billion for the week through Jun 10, up from US$12.2 billion the week prior, according to data by the Commodity Futures Trading Commission released on Friday. BLOOMBERG
