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05-Oct2018

US markets decline on Thursday as treasury yields extend climb

The US markets declined on Thursday as a recent jump by US treasury yields has raised concerns about the outlook for interest rates. With the ten-year yield reaching its highest levels in over seven years, traders seem worried the Federal Reserve may raise rates more aggressively than currently anticipated. Adding to the concerns Fed Chairman Jerome Powell said in remarks at the Atlantic Festival in Washington, D.C. after the close of trading on Wednesday that interest rates are a long way from neutral even after recent increases. Powell said the really extremely accommodative low interest rates that they needed when the economy was quite weak, they don't need those anymore. They are not appropriate anymore. He added interest rates are still accommodative, but they are gradually moving to a place where they will be neutral. He also said they may go past neutral, but they are a long way from neutral at this point.

On the economic front, the Labor Department released a report showing a bigger than expected drop in initial jobless claims in the week ended September 29. The Labor Department said initial jobless claims fell to 207,000, a decrease of 8,000 from the previous week's revised level of 215,000. Street had expected jobless claims to edge down to 213,000 from the 214,000 originally reported for the previous week. A separate report from the Commerce Department showed a bigger than expected rebound in factory orders in the month of August. The Commerce Department said factory orders surged up by 2.3% in August after falling by a revised 0.5% in July, while street had expected factory orders to jump by 2.1%.

Dow Jones Industrial Average slipped 200.91points or 0.75 percent to 26,627.48, Nasdaq declined 145.57 points or 1.81 percent to 7,879.51 and the S&P 500 was down by 23.90 points or 0.82 percent to 2,901.61.


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