US close: Stocks drop on Powell comments as bond yields near 5%

(Sharecast News) - US stocks dropped into the red on Thursday as 10-year bond yields closed in on the 5% mark on the back of comments from Federal Reserve chair Jerome Powell, who indicated that monetary policy would likely remain restrictive for some time yet. Ongoing geopolitical tensions in Israel were also continuing to weigh on sentiment, as seen by gold prices rising a further 1% to $1.986 an ounce on safe-haven demand as investors reduced their appetite for risk.

After struggling for direction for most of the morning, markets fell into negative territory after Powell's remarks, with the Dow finishing 0.8% lower, the S&P 500 falling 0.9% and the Nasdaq dropping 1%.

While Powell didn't go as far as saying that another rate hike was on the cards, he said that monetary policy wasn't "too tight right now" and that policymakers were "united in our commitment to bringing inflation down sustainably to 2%".

In prepared remarks, Powell said the recent easing of inflation was a positive sign, but economic indicators in September were "somewhat less encouraging".

"Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal," Powell said. "We cannot yet know how long these lower readings will persist, or where inflation will settle over coming quarters."

Following the speech, the yield on a 10-year US Treasury note reached a new high of 4.996%, up 9.4 basis points on the day, setting fresh 16-year highs.

"We still expect the bond market to do the Fed's work, making further policy rate hikes redundant," said analysts at Rabobank. However, they added that there is upside risk: "If economic data remain strong, sooner or later the FOMC will have to resume its hiking cycle."

Netflix impresses, Tesla drops

Netflix shares finished the session up 16% after the streaming group impressed with an 11% rise in subscriptions in its third quarter, along with plans to raise prices. The 8.8m net new paid subscribers was the biggest quarterly increase in over three years.

Tesla was down by 9% following a worse-than-expected decline in third-quarter profits, as founder Elon Musk delivered a cautious outlook on its long-delayed Cybertruck.

Telecoms group AT&T jumped 7% after beating earnings expectations in the third quarter on the back of strong wireless subscriber additions, and raising its free cash flow guidance.