6:22 a.m. What does the Dow do after suffering its worst drop since February? It drops some more.
Market experts have pointed to many reasons for the selloff, with the trade war between the U.S. and China, the Federal Reserve’s continuing rate increases, rising U.S. Treasury yields, and the squeeze on corporate margins from rising costs. And they’re all right, because these issues are interconnected. But at least the fact that the 10-year yield has stopped rising is a good thing, right? Maybe not.
“Equities are clearly in the red and investors are very concerned over the toll of Trump’s trade war on global growth but also domestic corporate profitability,” writes Konstantinos Anthis, head of research at ADSS. “Analysts expect a positive round of earnings for Q3 but weaker compared to Q2 and Q1 which suggests that forward guidance and expectations for year-end results may also be on the bearish side. As such, market participants are tempted to diversify their portfolios and look into Treasuries, hence the decline in their yield, which suggests more pain ahead.”