U.S. stocks are facing a triple threat from a stronger U.S. dollar, rising Treasury yields and higher oil prices that could further erode gains accrued by the main indexes since the start of 2023, analysts told MarketWatch.
Rising crude oil prices, along with demands for higher wages from auto workers and fast-food workers, have helped to stoke fears that inflation could reaccelerate, essentially forcing the Fed’s hand. Over the same period, the ICE U.S. Dollar Index DXY has risen 2.2%, while the 10-year Treasury yield has climbed by 24 basis points to 4.284%, according to FactSet.
It’s a stark contrast to 2022, when the S&P 500 and Nasdaq posted their biggest calendar-year losses since 2008, the year that a crisis rooted in souring mortgage bonds nearly toppled the global financial system. Although there are two weeks left until the end of September, both the S&P 500 and Nasdaq are on track to fall for a second straight month after declining in August. If this happens, it would mark the first back-to-back monthly losses for the indexes since September 2022.
Expectations that inflation could re-accelerate are at the root of the market’s concerns. Traders expectations for headline CPI have notably risen over the past month, according to inflation-swap data compiled by Bloomberg.
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