Stocks retreated last week as bond yields increased following the Treasury's announcement indicating “a larger-than-expected funding need” and a downgrade in the federal government’s debt rating.
The Dow Jones Industrial Average dropped 1.11%, while the Standard & Poor’s 500 shed 2.27%. The Nasdaq Composite index lost 2.85% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, tumbled 3.27%.
Stocks Struggle
Stocks struggled as investor sentiment turned cautious amid rising bond yields. Markets were rattled initially by news that the Treasury raised its borrowing requirement for the third quarter by more than a quarter of a trillion dollars and on news that the Bank of Japan announced it would allow bond yields to rise after years of
capping them. Rising yields continued to pressure stocks in the wake of a surprise rating downgrade of U.S. government debt by a major credit rating agency due to its belief in expected fiscal deterioration over the next three years. Stocks rebounded Friday morning, rising on modest employment data only to reverse and add to the week’s losses.
