Yields tumble as risk appetite fades. Treasury yields declined today as markets rotated out of technology stocks following a slate of disappointing earnings calls. The 2-year yield closed 10 bps lower at 4.60%, while the 10-year yield closed 8 bps lower at 4.94%. Meanwhile, equities slid with ServiceNow, Inc. plunging nearly 27% and Alphabet Inc. falling over 12%, with the S&P 500 and NASDAQ closing 0.30% and 1.38% lower, respectively.
September PCE avoids blowout. The Fed’s preferred inflation gauge, PCE, rose 0.5% in September, in line with expectations but marking the highest level since March. On an annualized basis, PCE edged up to 3.6% from 3.4% in the prior period. Excluding food and energy categories, core PCE rose 0.3% MoM and 3.1% YoY. The ongoing conflicts in Iran and Russia continue to weigh on the prices of energy and other goods. Today’s print comes the day after the Fed’s decision to hold policy rates steady, with Fed Chair Warsh repeating his commitment to tackling inflation, which remains above the 2% target.
GDP accelerates in third quarter. US gross domestic product grew at an annualized rate of 3.4% in the third quarter, according to preliminary data released today by the Bureau of Economic Analysis. The pace was above expectations of 3.2% and up from 2.2% in the second quarter, with growth largely driven by AI investment. Business investment in equipment jumped 20.9% at an annualized rate, while consumer spending increased 3.8% on the same basis. Ryan Young, a senior economist at the Competitive Enterprise Institute, cautioned that “much of the rest of the economy is growing more slowly than average. If there is an AI bubble and it pops, there could easily be a recession.”
