US Stocks’ Peak-Rate Party Spoiled by a Lousy Treasury Sale

-- Just when it looked like stocks were making a bullish turn, a troubling Treasury auction slammed the brakes on the market’s momentum.The $20 billion 30-year Treasury auction went off at the highest rate since 2007 at 1 p.m. in New York Thursday. Within minutes the S&P 500 Index tumbled, falling as much as 1.2% before regaining its footing. The Cboe Volatility Index, also known as the VIX or Wall Street’s fear index, spiked above 17.

But sentiment reversed after the 30-year Treasury auction, which drew weak demand and weighed heavily on the broader market sentiment. Swap contracts linked to future interest-rate decisions pushed the odds of another quarter-point hike back to about 50%, up from about 30% as recently as Wednesday. Before sentiment turned, equity investors had already shrugged off a consumer price index report that topped expectations. Traders instead focused on the core annual inflation rate, which rose 4.1% in September, the slowest pace in two years.

The yield on 10-year Treasuries rose above 4.7% on Thursday, reversing a two-day decline. The tech-heavy Nasdaq 100 Index had the least bad session, falling 0.4%. Futures on the gauge as well as those on the S&P 500 were up 0.1% in early Asia trading on Friday.

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