The US Treasury market is rearing its head once again on Friday, this time causing a broad sell-off in US market indices. The NASDAQ Composite opened up close to 1.4% lower, while the S&P 500 and Dow Jones Industrial Average (DJIA) are both off between 0.5% and 1.0%. All three indices sold off much worse in the futures market, so there is reason to believe the indices will fall further as the regular session gets underway.
The culprit? Treasury yields.
The US 10-year has risen nearly 8 basis points to 4.57%, while the US 30-year yield is up about 1.6% to 5.11%.
Many observers are pointing to political instability in the leadership of Prime Minister Kier Starmer in the United Kingdom (UK). Upheaval in his own Labour Party has led to further calls for Starmer to resign, pushing up Gilt yields.
On the US side of the ledger, the NY Empire State Manufacturing Index for May came in Friday morning extremely hot at 19.6, several deviations above the consensus of 7.5 and the previous reading of 11. The hot reading gives the Federal Reserve (Fed) more impetus to raise interest rates in the face of a roaring economy and rising inflation.
Then there’s US President Donald Trump’s trip to China, which ended without a much-needed deal for US semiconductors or a decision to quickly open the Strait of Hormuz. Crude Oil (WTI) has risen 2.7% and is closing in on $104.
Even Thursday’s hyper-bullish IPO by Cerebrus Systems (CBRS), which rallied 68% on its debut, is down some 4%.
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