The S&P 500 slipped Friday as the benchmark 10-year Treasury yield climbed back above 5%, with traders weighing how many more rate hikes the Federal Reserve has left after this week's meeting. Crude oil held above $100 a barrel even as it pared earlier gains, keeping inflation concerns in focus for investors.
The yield on the 10-year Treasury note rose more than 5 basis points to 5.00% on Friday. The 2-year Treasury yield gained more than 4 basis points to 4.739%, and the 30-year yield added 4 basis points to 5.336%. Earlier in the week the 10-year yield hit 5.041%, its highest level since 2007.
Warsh's "dose of accommodation" fuels rate-hike bets
The moves follow the Fed's Wednesday decision to approve a quarter-point rate hike, its first rate hike in three years. Fed Chairman Kevin Warsh described the move as removing, according to CNBC: "a dose of accommodation" — language Wall Street read as leaving the door open to further tightening.
That framing pushed traders toward pricing in higher odds of another hike in October, with the probability rising to 57.6%, up from 42.5% a week earlier and 7.2% a month ago, according to CME's FedWatch tool. Goldman Sachs and Bank of America both added an October hike to their forecasts, and Bank of America also expects a further move in December.
Wall Street ends a split week mixed
The Dow Jones Industrial Average fell 174.35 points, or 0.34%, to 51,603.46. The S&P 500 lost 8.92 points, or 0.12%, to 7,628.84, while the Nasdaq Composite slipped 0.35 point, or 0.00%, to 26,417.95, held up by a semiconductor rally. The Dow was on course for its biggest weekly percentage decline since March.
Crude prices stayed above $100 a barrel but paused their climb after China, at Saudi Arabia's request, asked Iran to limit Houthi rebel attacks on Saudi oil infrastructure. Soaring oil has pushed diesel prices to record levels, which is likely to translate into broader inflation pressure on farming and shipping costs.
Sources: Investing.com, CNBC, CNBC
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