In case investors didn't get the message yet, the "Fed put" has officially been retired. As Jerome Powell looks set on vanquishing soaring inflation and entrenched expectations, economic growth and hopes of a soft landing have been thrown into the back seat, with some arguing - maybe a bit too strongly. The crew at the central bank has even promised more rate hikes in November and December, after accelerating the unwinding of its balance sheet this month, and there are fears that the real effects could soon start rippling through the economy.
The latest: The 10-year Treasury climbed 4 basis points on Wednesday morning to breach the key 4% level. The last time that happened was in 2008, at the height of the global financial crisis. It's even more astonishing when considering the pace of the yield's ascent, with the benchmark sitting at only 1.50% at the start of the year.
"Bond yields gravitating toward or above 4% means markets are pricing in tighter policies for longer," noted Daniel Tenengauzer, head of markets strategy at BNY Mellon. "In my opinion, it's the realization that bond yields are highly unlikely to revert to a lower range in the medium to longer term, given higher inflation and tighter policy for longer, that's having an impact."
Everything bubble deflates: The Dow Jones slipped further into a bear market and the S&P 500 fell to its lowest level in almost two years on Tuesday, while the Nasdaq Composite inched higher, but is still off nearly 32% YTD. Meanwhile, home prices were shown to have fallen for the first time in a decade as demand gets dented amid soaring rates. In another indicator of the economic times, reports now suggest that Apple is pulling plans to boost iPhone production despite raising projections as it headed into the September launch event for the iPhone 14.