The Dow Jones Is on The Verge of Losing All the Gains It Made In 2023

Dow Jones is set to lose all gains since 2023 as the index fell by 1.4%, or over 400 points, yesterday.

The S&P 500 and Nasdaq had stronger gains than the Dow this year, but the Dow still managed to reach its peak of 8% in August 2023. However, the 10-year Treasury yield surged to 4.787% on Tuesday, its highest level since 2007, which is putting pressure on stocks. The Federal Reserve’s indication of higher-for-longer interest rates has caused investors to adjust their strategy, given the rally earlier in the summer.

On Tuesday, the negative relationship between good news and the stock market continued as the latest Job Openings and Labor Turnover Survey (JOLTS) data showed an increase in job openings, signaling continued strength in the labor market. This news bolstered the case for the Federal Reserve to maintain its aggressive stance on interest rates. Quincy Krosby, Chief Global Strategist for LPL Financial, explained that the market is closely monitoring the path of interest rates, and any indication of a stronger wage environment is a cause for concern, as investors try to determine when – and hopefully if – the Fed is close to ending its current rate-hiking campaign.

On Friday, new payroll data should provide the Fed and markets with additional data points to clarify how concrete the “higher for longer” narrative is and what that implies for the broader economy.

The stock market’s losses so far in October extend a brutal two-month stretch for investors, with September posting the worst monthly loss of 2023. Some pockets of the economy have already seen hard-landing scenarios unfold, such as in manufacturing, housing, and some consumer goods areas, according to Liz Ann Sonders, Charles Schwab’s chief investment strategist. “The recent jumps in the “triple threat” of bond yields, oil, and the dollar — along with a still-murky inflation path — act as hurdles in avoiding more hard landings and/or an officially declared recession, not least because of the increasing likelihood they dent consumer confidence,” Sonders wrote in a note Tuesday. “Of course, any easing in the triple threat could dial back some pressure, but for now, we remain on watch for that.”

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