Dow ends over 250 points lower after Powell’s remarks, as 10-year Treasury yield nears 5%

What’s driving markets

It was all eyes on the bond market as the yield on the 10-year Treasury note
BX:TMUBMUSD10Y
pushed to within less than a basis point of the psychologically important 5% threshold. The yield ended North American trading up 8.5 basis points at 4.987%, its highest since July 20, 2007, according to Dow Jones Market Data.

Read: Why stock-market investors are fixated on 5% as 10-year Treasury yield nears key threshold

The yield had pulled back amid remarks by Powell, who said the Fed may need to do more to rein in inflation but also said policy makers would proceed with caution — language that analysts saw as a signal rates would remain on hold, as already expected, on Nov. 1, and likely in December as well.

“Jerome Powell continues to walk a middle line between hawk and dove. The Fed still isn’t sure whether it’s done enough,” said David Russell, head of global strategy at TradeStation. “He noted positives in the labor market, but it’s hard to get too dovish given this week’s retail sales and jobless claims. So he’s keeping his options open and waiting for more clarity before committing either way,”

During a question-and-answer session that followed his prepared remarks, Powell acknowledged that rising Treasury yields were leading to tighter financial conditions, which could aid the Fed in its inflation-fighting efforts.

See: Fed’s Powell: Live coverage of pivotal speech as bond yields surge

“The fact is, the yields are doing some of the work for them, and I think what he’s acknowledging is that he’s keeping his eye on that, but his message really is ‘If the market doesn’t do it for us, we’ll do it ourselves,’” said JJ Kinahan, chief executive of IG North America, during a phone interview with MarketWatch.

See also: Powell says more strong data like September reports could warrant further interest-rate hikes

U.S. labor-market data released Thursday came in stronger than expected, as the number of Americans who applied for unemployment benefits last week fell to a nine-month low of 198,000, defying expectations that layoffs would rise as higher U.S. interest rates impact the economy.

A gauge of regional business activity published by the Philadelphia Fed remained in contractionary territory for the second straight month in October.

Housing-market data showed home sales in September fell to the lowest level since 2010, as high mortgage rates continue to deter buyers and sellers alike. Sales of previously owned homes fell by 2% to an annual rate of 3.96 million in September.

Meanwhile, the third-quarter corporate earnings reporting season moves on.

In terms of the wider market, the results late Wednesday from Netflix
NFLX,
+16.05%
and Tesla
TSLA,
-9.30%
have somewhat canceled each other out, with shares in the streaming giant jumping more than 16% on well-received numbers and the electric-vehicle maker’s stock ending with a loss of 9.3% following cautious comments from Elon Musk.

Companies in focus

• Equifax Inc. shares
  EFX,
  +2.18%
  rose 2.2%, shaking off an earlier loss seen after the credit-score agency cut its outlook for the year over concerns that high mortgage rates are causing mortgage-credit inquiries to track at a 37% decline for the year.
• American Airlines Group Inc. shares
  AAL,
  +0.79%
  rose 0.8%, bouncing off a three-year low, even after the air carrier reported third-quarter revenue that came up a bit short and provided a downbeat profit outlook.
• Las Vegas Sands 
  LVS,
  +2.87%
  saw its shares jump 2.9%, bringing up other casino stocks, after it noted a recovery at its resorts in Macau and Singapore.

Jamie Chisholm contributed.