Dow edges higher, bouncing back after Powell remarks snap S&P 500, Nasdaq winning streaks

Market drivers

The S&P 500 and Nasdaq Composite ended their longest winning streaks since November 2021 on Thursday, after a poorly-received $24 billion sale of 30-year Treasury bonds.

Treasury bond yields were easier on Friday. The yield on the 30-year Treasury bond
BX:TMUBMUSD30Y
fell 5.1 basis points to 4.725%, from 4.777% on Thursday, when it nearly notched its biggest one-day jump since June 2022.

It was unclear whether the Treasury auction had been affected by a reported ransomware attack against the U.S. unit of the Industrial & Commercial Bank of China that apparently disrupted the U.S. Treasury market.

Investors were also rethinking the recent debt market rally fueled by hopes that the Federal Reserve’s interest-rate hiking cycle was finishing. Driving angst were comments from Federal Reserve Chairman Jerome Powell, who told an International Monetary Fund panel on Thursday that the central bank was wary of “head fakes” from inflation, and the “2% goal was not assured.”

Much of Powell’s language was nearly identical to remarks he made on Nov. 1, when investors rallied stocks and bonds after the Fed chair didn’t explicitly commit to a further interest rate hike. But the subsequent rally for stocks after the Nov. 1 Fed meeting, with the S&P 500 jumping more than 6% over eight days, and a 50 basis point drop in the 10-year Treasury yield were “overdone and not governed by facts,” said Tom Essaye, founder of Sevens Report Research, in a note.

“Meanwhile, if we think about what the Fed said last week, namely that the rise in the 10-year yield was doing the Fed’s work for it and as a result they may not have to hike rates, then the short/sharp decline in the 10-year yield we’ve seen could essentially remove the reason for the Fed not having to hike rates — and that could put a rate hike back on the table!” he wrote. “That’s essentially what Powell reminded us of yesterday and that, along with the poor Treasury auction, pushed yields higher,” setting up pressure on stocks.

Consumer sentiment fell in November for the fourth month in a row due to worries about higher interest rates as well as war in the Middle East. The preliminary reading of the sentiment survey declined to 60.4 from 63.8 in October, the University of Michigan said Friday. It’s the weakest reading since May.

Investors will be looking out for more Fed comments on Friday, a speech by San Francisco Fed President Mary Daly at 1 p.m. Eastern time.

Companies in focus

• Shares of Plug Power Inc.
  PLUG,
  -42.75%
  dropped 37.6% after the fuel-cell company missed analysts expectations and said its performance had suffered due to “unprecedented supply challenges.”

• Trade Desk Inc.
  TTD,
  -17.47%
  shares fell 18.8% after the advertising technology company’s guidance fell short of expectations.

• Illumina Inc.
  ILMN,
  -13.21%
  shares dropped 14% after the maker of DNA-sequencing technology cut its full-year sales and profit outlook.

• Lions Gate Entertainment Corp.
  LGF.A,
  -0.83%
  shares were up 3.5% after the TV, film and media giant reported a surprise second-quarter profit, and stuck with its full-year outlook “even with the negative impact of the strike” by Hollywood’s writers and actors earlier this year.