NEW YORK (AP) — U.S. stocks are slipping Monday as pressure rises from the bond market after Treasury yields hit their highest levels since the summer.
The S&P 500 was 0.3% lower in early trading, though it’s still close to its all-time high set a week ago. The Dow Jones Industrial Average was down 140 points, or 0.3%, coming off its own record. The Nasdaq composite was down 0.3%, as of 9:35 a.m. Eastern time.
U.S. stocks have been largely rallying to records on relief that interest rates are finally heading back down, now that the Federal Reserve has widened its focus to include keeping the economy humming instead of just fighting high inflation. Friday’s blowout report on U.S. jobs growth raised optimism about the economy and hopes that the Fed can pull off a perfect landing for it.
But Friday’s jobs report was so strong that it also forced traders to ratchet back forecasts for how much the Fed will ultimately cut interest rates by. That in turn has sent Treasury yields higher, and the 10-year yield is back above 4% for the first time since August.
The two-year Treasury yield also briefly climbed back above 4%, up from just 3.50% a couple weeks ago. That’s a sizeable move for the bond market, and it can drag on prices for stocks and kinds of other investments.
When Treasury bonds, which are seen as the safest possible investments, are paying more in interest, investors become less inclined to pay very high prices for stocks and other things that carry bigger risk of losing money.
Companies in the housing industry can also feel more pressure from higher Treasury yields, which translate into higher mortgage rates. Builders FirstSource fell 2.7% for one of the largest losses in the S&P 500. Home Depot and home builders D.R. Horton, PulteGroup and Lennar at fell at least 1%.
Elsewhere on Wall Street, winemaker Duckhorn Portfolio more than doubled after a private-equity firm said it would buy the company for roughly $1.95 billion in cash.
In the bond market, the yield on the 10-year Treasury rose to 4.01% from 3.97% late Friday.
The yield on the two-year Treasury, which more closely tracks expectations for the Fed, jumped more. It rose to 3.98% from 3.92%.
Treasury yields may also be feeling some upward push from the recent jump in oil prices. They’ve been spurting higher on worries that worsening tensions in the Middle East could ultimately lead to disruptions in the flow of crude.
Brent crude, the international standard, rose another 1.4% Monday to $79.18 per barrel. Benchmark U.S. crude, meanwhile, gained 1.7% to $75.63 per barrel.
In stock markets abroad, European indexes were moving modestly following bigger gains in Asia.
Japan’s Nikkei 225 index gained 1.8% after the value of the yen sank against the U.S. dollar. A weaker yen can boost profits for Japanese exporters.
Nintendo gained 4.4% following reports that a Saudi wealth fund was planning to increase its investment in the Kyoto, Japan-based video game maker.
Stock markets in mainland China will reopen on Tuesday from a weeklong holiday, and the government said it plans to explain details of plans for economic stimulus at a morning news conference in Beijing. Before the Oct. 1 National Day holiday began, stocks in Shanghai and Shenzhen had soared following announcements of policies aimed at reviving China’s struggling real-estate market.