Wall St dips, Treasury yields spike on robust data, solid earnings

By Stephen Culp

NEW YORK (Reuters) -U.S. stocks dipped and benchmark Treasury yields surged on Tuesday as robust economic data and strong third-quarter earnings appeared to make the case for the Federal Reserve keeping restrictive policies in place for longer than expected.

All three major U.S. stock indexes headed lower with interest rate sensitive megacap shares pulling the tech-laded Nasdaq down the most.

Semiconductor shares tumbled after the Biden administration announced plans to halt shipments to China of more advanced artificial intelligence chips.

The was last down 1.5%.

Consensus-topping retail sales data, along with solid profit beats from Bank of America and Goldman Sachs added to a growing mountain of evidence that the United States economy is chugging along despite the central bank’s attempts to rein in inflation by raising interest rates.

“Good news is bad news, that’s the key,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “The retail sales number was solid, and could have the possible effect of keeping rates higher for longer.”

“That’s probably the biggest factor in the turnaround in today’s equities markets.”

Market participants were also eyeing the unfolding humanitarian crisis arising from the Israel-Hamas conflict as U.S. President Joe Biden heads to the region.

The fell 74.71 points, or 0.22%, to 33,909.83, the lost 14.97 points, or 0.34%, to 4,358.66 and the dropped 84.32 points, or 0.62%, to 13,483.67.

European stocks extended their losses after the U.S. opening bell, weighed down by a spate of downbeat earnings and mounting geopolitical concerns arising from the Middle East conflict.

The pan-European index lost 0.36% and MSCI’s gauge of stocks across the globe shed 0.09%.

Emerging market stocks rose 0.50%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.55% higher, while rose 1.20%.

Benchmark Treasury yields spiked after the strong retail sales data as market participants adjusted their expectations regarding the duration of the central bank’s tightening cycle.

Benchmark 10-year notes last fell 30/32 in price to yield 4.8341%, from 4.71% late on Monday.

The 30-year bond last fell 44/32 in price to yield 4.9623%, from 4.866% late on Monday.

The greenback edged lower against a basket of world currencies amid the unfolding Middle East drama and as market participants braced themselves for speeches by central bank officials.

The fell 0.05%, with the euro up 0.15% to $1.0574.

The Japanese yen weakened 0.12% versus the U.S. dollar at 149.69 per dollar, while sterling was last trading at $1.2181, down 0.29% on the day.

Crude prices inched higher as traders looked to Biden’s impending visit to shore up support for Israel while containing the conflict in the Middle East.

rose 0.6% to $87.18 per barrel and was last at $90.22, up 0.64% on the day.

Gold prices rose as the safe-haven metal benefited from mounting geopolitical uncertainties.

added 0.4% to $1,926.39 an ounce.