US stock market has been experiencing a decline for the last two weeks, with all major indices falling. The decline can be attributed to the influence of US treasuries, which are contributing to a risk-off sentiment. Higher Treasury yields can curb investors’ appetite for stocks and other risky assets by tightening financial conditions as they raise the cost. The stock market has been under pressure from the bond market, where the yield on the 10-year Treasury briefly touched 5% Thursday evening for the first time since 2007. High yields make borrowing more expensive for everyone, and they slow the economy while dragging on prices for stocks and other investments. The role played by earnings should intensify this week as some of the tech giants step up to bat. 2023 has seen an overreliance upon a handful of names to drive market upside, with speculation over potential AI revenues helping to lift valuations. Elevated treasury yields continue to put downward pressure on stock valuations. The yield on the 10-year U.S. Treasury note topped 5% early Monday, reclaiming a peak seen last week which marks the highest point for the yield benchmark since 2007. The week ahead will be busy for markets, with earnings due from Microsoft, Alphabet, Amazon, and Meta Platforms. The market was quick to react to this somewhat hawkish Fed outlook. Treasury yields moved sharply higher, as both the 2-year and 10-year yields moved to highs of this cycle, putting downward pressure on stock and bond returns. Longer-duration parts of the market, including technology and growth sectors, underperformed the broader market.
Geopolitical tensions in the Middle East have been a cause of concern for investors in the US stock market. The Israeli-Hamas war has sharpened focus on rising geopolitical risks for financial markets, as investors wait to see if the conflict draws in other nations. In the past week, concerns about the conflict have fed through to asset prices, contributing to weakness in stocks. Safe-haven assets saw buying with gold ended the week up with more than 2.5%.