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Wall Street dips as U.S. Treasuries graze 5%, Middle East tensions simmer

by Jessica Weisman-Pitts
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Wall Street dips as U.S. Treasuries graze 5%, Middle East tensions simmer

By Stephen Culp

NEW YORK (Reuters) -Wall Street struggled for gains and benchmark U.S. Treasuries reached a new 16-year high as market participants looked ahead to U.S. Federal Reserve Chairman Jerome Powell’s impending remarks against a backdrop of solid earnings, mixed economic data and simmering geopolitical tensions.

The three major U.S. stock indexes were mixed but trending lower, with interest-rate sensitive momentum stocks keeping the Nasdaq afloat, while the S&P 500 and the blue-chip Dow dipped into the red.

Third-quarter reporting season has hit full stride, with a mixed bag of earnings from high profile companies such as Tesla Inc and Netflix Inc sending market participants in search of an emerging common theme.

“Across industries, in many cases estimates and guidance is being tempered due to rising interest rates,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Fed Chairman Powell is set to speak at noon, and his remarks will be scrutinized for clues regarding the central bank’s path forward beyond its November policy meeting.

“The Fed is still being data dependent and there are signs that the rate hikes that have been put into place are starting to work, suggesting the rate hike cycle has come to an end,” Tuz added.

The Israel-Hamas conflict continued with air strikes continuing to pound Gaza. British Prime Minister Rishi Sunak followed U.S. President Joe Biden’s visit to the region to bolster support for Israel’s fight against Hamas militants and help find a diplomatic solution to the conflict.

On the economic front, existing home sales dropped to a 13-year low, jobless claims dipped to their lowest level since January and the Leading Economic index notched its 18th straight monthly decline.

The Dow Jones Industrial Average fell 151.2 points, or 0.45%, to 33,513.88, the S&P 500 lost 11.56 points, or 0.27%, to 4,303.04 and the Nasdaq Composite added 5.10 points, or 0.04%, to 13,319.40.

European shares tumbled to a two-week low as dour earnings exacerbated risk-off sentiment driven by geopolitical worries and uncertainty over interest rates.

The pan-European STOXX 600 index lost 1.19% and MSCI’s gauge of stocks across the globe shed 0.59%.

Emerging market stocks lost 1.29%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.53% lower, while Japan’s Nikkei lost 1.91%.

U.S. Treasury yields surged, with the 10-year touching a fresh 16-year high as investors demand higher return amid a tough funding environment.

Benchmark 10-year notes last fell 10/32 in price to yield 4.9428%, from 4.902% late on Wednesday.

The 30-year bond last fell 14/32 in price to yield 5.0242%, from 4.994% late on Wednesday.

The greenback weakened against the euro and the yen as benchmark Treasury yields eased back from the 5% level ahead of Powell’s remarks.

The dollar index fell 0.22%, with the euro up 0.29% to $1.0566.

The Japanese yen strengthened 0.07% versus the greenback at 149.83 per dollar, while sterling was last trading at $1.2145, up 0.04% on the day.

Crude prices pulled back as the United States eased sanctions on Venezuela, countering supply concerns arising from the Middle East conflict.

U.S. crude fell 0.65% to $87.75 per barrel and Brent was last at $90.85, down 0.71% on the day.

Gold firmed in opposition to the dollar’s weakness as mounting Middle East turmoil sparked safe-haven demand.

Spot gold added 0.1% to $1,950.39 an ounce.

(Reporting by Stephen Culp; Additional reporting by Amanda Cooper in London; Editing by Bernadette Baum)