S&P 500 falls 1%, Dow falls more than 100 points as Treasury yields hit new highs

The Fed is starting to slow the economy and inflation, says Blackstone COO Jon Gray

Stocks fell in choppy trading on Thursday as investors weighed several key earnings reports and kept an eye on the bond market, where government yields continue to rise.

The Dow Jones Industrial Average was down 116 points, or 0.4%. The Nasdaq Composite fell 0.8 percent, while the S&P 500 was down 0.9 percent. The Dow rose more than 300 points at session highs, but stocks faded as Treasury yields rose.

The benchmark 10-year Treasury yield hit a peak of 4.222% on Thursday, trading at levels not seen since 2008. Rising interest rates have been a headwind for stocks all year, as the Federal Reserve continues to try to cool inflationary pressures that have not is seen for decades.

“As long as official policy is to make the stock market go down, so that people are less wealthy, so that they buy fewer things, so that prices stop going up, while doing nothing about fiscal policy, we believe that the right the stance is to be bearish on stocks and bullish on inflation,” Greenlight Capital’s David Einhorn said in an investor letter obtained by CNBC.

Several strong earnings reports capped losses for the market, with AT&T and IBM rising 7.4% and 4.8%, respectively, after beating top- and bottom-line estimates for their latest quarter.

On the downside, Tesla shares fell 7% after the electric car maker said on Wednesday evening that it expects to miss its delivery target for 2022. The company also posted quarterly revenue that missed analysts’ expectations.

The rising Treasury yield environment is one of the reasons many strategists are skeptical that the market can sustain a near-term rally, even though the third-quarter earnings season has been better than expected so far.

“Our guess is that earnings will be good enough to keep the market in a trading range, but not enough to send it back to the midsummer high, and given the lag in monetary policy, we would argue that the time is not in the market. We will see US yields continue to push out to new cycle highs, helping the USD collapse,” Michael Shaoul of Marketfield Asset Management said in a note. The dollar hit its highest level against the Japanese yen since 1990 on Thursday.

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