US stocks experienced a significant surge on Thursday, propelled by plummeting 10-year and 30-year Treasury yields. The Dow Jones Industrial Average rose by 0.92% to reach 33,582.15 points, and the Nasdaq Composite increased by 1.32% to hit 13,234.22 points.
The 10-year Treasury yield fell by up to 16 basis points to 4.62%, a substantial decline from last week's highs of over 5%. This was triggered by the Treasury Department's quarterly auction plan, which indicated a deceleration in long-duration bond issuance. The decrease in yields provided relief to Wall Street bond investors following a protracted selloff.
The Federal Reserve, under Chairman Jerome Powell, maintained interest rates at the 5.25%-5.5% range for the second consecutive meeting due to tight financial conditions. Despite positive strides in inflation management acknowledged by Powell, no further rate cuts were suggested.
Market predictions from the CME FedWatch Tool indicate no further interest rate hikes are anticipated. This comes as several investors have misjudged the termination of a selloff that threatens Treasuries with a third year of losses.
Billionaire investor Stanley Druckenmiller has demonstrated bullishness on U.S. Treasury bonds due to apprehensions about the U.S. economy's health. Advocates for bonds argue for amplified exposure to long-term securities, which could rise in value if an economic slowdown prompts the Fed to lower rates.
Indicators of a subtle economic slowdown include diminishing savings from the COVID-19 pandemic, the resumption of student loan repayments, and soaring borrowing costs affecting consumers and businesses alike. The S&P 500 has retreated nearly 8% from its July peak due to competition from increasing Treasury yields and potential hikes in companies' cost of capital.
The investor community is closely monitoring the upcoming release of Apple (NASDAQ:AAPL)'s quarterly earnings report. The imminent U.S. payrolls data could rekindle expectations of Fed hawkishness if it exceeds projections.
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