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CNBC Daily Open: High rates are breaking something new in markets – CNBC

Traders work on the floor of the New York Stock Exchange during afternoon trading on July 18, 2023 in New York City.

Michael M. Santiago | Getty Images News | Getty Images

This report is from today’s CNBC Daily Open, our new international markets newsletter. The CNBC Daily Open provides investors with everything they need to know, no matter where they are. Like what you see?You can subscribe here.

dramatic drop
The major U.S. indexes fell at least 1% on Tuesday, pushing the Dow Jones Industrial Average into the red for the year. The yield on the 10-year US Treasury note hit a 16-year high of 4.8% earlier in the day. Asia-Pacific markets followed Wall Street in decline on Wednesday. Japan’s Nikkei 225 and South Korea’s Kospi both fell about 2%. Meanwhile, the Reserve Bank of New Zealand kept its key interest rate unchanged at 5.5%.

sharp impact
The number of job openings in August was 9.61 million, much higher than the expected 8.8 million, and 700,000 more than in July. However, payrolls rose by just 35,000 from July to 5.857 million last month. Additionally, the number of people leaving their jobs, a measure of confidence in finding a new job after quitting a previous job, was little changed at 3.6 million.

Land with increasing investment
According to commercial real estate firm CBRE, foreign investment in the Japanese real estate market increased by 45% in the first half of 2023 compared to the same period last year. Interest has increased due to Japan’s ultra-easy monetary policy and the weak yen (which at one point fell to 150 yen to the dollar on Tuesday). According to Knight Frank, Singapore is the biggest investor, followed by the United States and Canada.

Speaker, mute.
Eight hardline conservative Republicans joined all Democrats to oust Republican Kevin McCarthy from the Speaker’s chair in a motion filed by Republican Matt Gaetz. This is the first time in U.S. history that the House of Representatives has ousted a party leader through a vote of no confidence. Patrick McHenry, a close ally of Mr. McCarthy, will temporarily take on the speaker’s role. He said Mr. McCarthy would never run again.

[PRO] Play better than technology
India’s economic growth is expected to be one of the fastest in the coming decades. But Citi said investors looking to make a fortune in the country’s stock market should look beyond the country’s technology sector, which is facing global headwinds. In fact, the bank believes the sector will benefit from strong domestic growth and outperform tech.

CNBC’s Jeff Cox writes that something is breaking in financial markets. Unlike in March, when local banks began to fail, this time it is not a specific asset class that is failing. Rather, the story of long-term low interest rates, a narrative that has become familiar since the Great Financial Crisis of 2008, is crumbling.

U.S. Treasury yields soared after the market digested the stronger-than-expected JOLTS report released by the U.S. Department of Labor, which showed the job market was not as loose as conventional wisdom. The two-year bond yield, which indicates the point at which the market thinks interest rates will settle down, is currently 5.154%, compared with 5.048% at last Friday’s close. In fact, the probability that the Federal Reserve will raise interest rates at its November meeting was 28.1% on Wednesday, up another quarter of a percentage point from 16.4% last week, the paper said. CME FedWatch Tools.

Stock prices fell due to rising yields and expectations for further interest rate hikes. The Dow Jones Industrial Average had its worst day since March. The 1.29% decline wiped out year-to-date gains and is down 0.4% since the beginning of the year. The S&P 500 fell 1.37%, and the Nasdaq Composite fell 1.87%, weighed down by declines in tech stocks such as Nvidia and Microsoft.

Investors fear the worst may not be over. The CBOE Volatility Index, which measures traders’ expectations for stock prices over the next 30 days, is at its highest level since late May, hinting at future volatility. (Currently, however, he is at 19.78, slightly below his long-term average.)

“We feel that the U.S. stock market is likely in the process of bottoming out and is likely to hit a low this week,” said Mark Newton, head of technical strategy at Fundstrat. But if interest rates continue to rise, it’s not just long-held beliefs that will be undermined. Stocks could test new lows beyond this year.

“They can’t raise basis points any more,” said founder Larry McDonald. bear trap reportsaid about central banks. “It’s too painful. These kinds of actions highlight the pain, and the Fed is now raising awareness about the bodies that are being buried.”

—CNBC’s Jeff Cox contributed to this report.

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