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Dow Falls 400 Points As 10-Year Treasury Yield Hits Highest Level Since January 2019

Topline

Stocks fell on Monday as government bond yields surged—with the 10-year Treasury jumping above 2.7%, its highest level since January 2019—amid ongoing fears about inflation, with investors dumping riskier assets as they brace for more aggressive rate hikes from the Federal Reserve.

Key Facts

Stocks took a hit Monday, adding to last week’s losses: The Dow Jones Industrial Average fell 1.2%, over 400 points, while the S&P 500 lost 1.7% and the tech-heavy Nasdaq Composite 2.2%.

Government bond yields spiked higher amid growing alarm about surging inflation: The 10-year Treasury note jumped above 2.78% on Monday, its highest level since January 2019.

The downward movement could continue this week as the latest Consumer Price Index from the Bureau of Labor Statistics, which will be released on Tuesday, is expected to show a staggering 8.4% increase in prices from last year.

Investors continued to rotate out of riskier assets including growth and technology stocks, portions of the market which experts think will be most impacted by rising rates.

Oil prices, which remain volatile amid Russia’s ongoing invasion of Ukraine, fell again on Monday and now sit at around $95 per barrel: Shares of major energy companies like Occidental Petroleum and Diamondback Energy subsequently both lost more than 4%.

Surprising Fact:

Amid the surge in Treasury yields on Monday, the price of Bitcoin fell roughly 7% to around $40,000, its lowest level in almost a month.

Tangent:

Shares of e-commerce company Shopify jumped 2.5% after the company proposed a 10:1 stock split as well as more voting power for its billionaire CEO, Tobi Lutke. Shopify is the latest company to seek a stock split this year, following the likes of Google-parent Alphabet’s 20:1 split in early February and Amazon’s 20:1 split in March.

Crucial Quote:

“Wall Street is worried that inflation will eventually destroy all the growth potential that was supposed to happen this year,” says Edward Moya, senior market analyst for Oanda. “Weakness in consumer spending is emerging and that is why many stock traders are entering de-risking mode.”

What To Watch For:

Russia’s invasion of Ukraine has complicated the economic outlook by “fanning already heated inflation and inflation expectations and forcing the Federal Reserve on high alert,” says Moody’s Analytics chief economist Mark Zandi. “The odds of a recession beginning in the next 12 months [are] rising to an uncomfortably high one in three.”

Further Reading:

Shopify’s Stock Split Announcement Isn’t Boosting Shares As Its Billionaire CEO Looks To Gain More Control (Forbes)

Here’s How Much Major Energy Companies Are Losing By Exiting Russia (Forbes)

Federal Reserve Hints At Bigger Rate Hikes Ahead, Outlines Plan To Shrink Balance Sheet (Forbes)

Major Bank Is First To Forecast A Recession—More Could Follow (Forbes)

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