The year opened with countertrend movements in yields, the US dollar, and stocks.
In terms of yields, the US dollar was mostly low compared to major currencies in 2023. The exception was against JPY. NZD and AUD remain almost unchanged over the year.
Currently, the US dollar has finished as the strongest of the major currencies, gaining more than 1%, led by the New Zealand dollar and Swiss franc. The dollar moved the least against the Canadian dollar today, rising 0.71%.
The US dollar was the strongest of the major currencies
The dollar's rise was helped by rising US yields. Yields have fluctuated in 2023, but from around October 20th, yields will drop sharply. On the 10-year note, the yield rose to 5.02% before falling to 3.783%, erasing a strong rise in October. This pushed the yield below its 2022 closing level of 3.88%, but it has since rebounded to end the year at 3.866%, about 2 basis points lower than on the same day.
The 10-year bond yield now rose 7.5 basis points to end at 3.935% on the strength of the U.S. dollar.
Looking at the other parts of the yield curve, we see this:
- The two-year bond yield rose 7.4 basis points to 4.324%.
- The five-year bond yield rose 8.5 basis points to 3.915%.
- The 30-year Treasury yield rose 5.9 basis points to 4.076%.
Finally, U.S. stocks soared in 2023, ending the year on a nine-week winning streak. The rise in 2023 was led by the Nasdaq index, which rose more than 43% over the same period. Today's fortunes were not so rosy, falling -1.63% (-245.42 points) to 14765.93. The S&P rose about 3 points from last week's closing price of $4,796, but fell -27.00 points (-0.57%) to 4,742.82.
The only bright spot was a slight increase in the Dow Jones Industrial Average, which rose slightly by 25.50 points or 0.07% to 37,715.05.
What triggered the movement?
In terms of stock prices, Apple was given an unusual downgrade by Barclays prior to the move, citing concerns about iPhone sales. This caused Apple stock to drop -3.64% on the day. Other high flyers in 2023 also felt the pinch of profit taking.
- Nvidia, -2.73%
- Meta, -2.17%
- Alphabet, -1.09%
- Microsoft, -1.37%
- Adobe, -2.77%
- AMD, -5.99%
- Coinbase is down -9.80% even though Bitcoin is trading above $45,000 (currently trading at $45,213 after trading as high as $45,922).
The rise in interest rates and the US dollar may be due to the fact that they moved too quickly towards the end of the year. Lack of liquidity can lead to exaggerated movements. That may have contributed to today's rise in yields and the US dollar.
One day alone does not form a trend, but the first trading day of a calendar year is different than the days leading up to the close of 2023.
