Dow rises for first time in 3 days, but gains capped amid fear of higher rates

Source: CNBC

The Dow Jones Industrial Average rose for the first time in three days on Monday, but its gains were kept in check as investors continued to fret over a sharp rise in interest rates.

The 30-stock index climbed 39.73 points to 26,486.78, led by gains in Walgreens Boots Alliance. The S&P 500, however, closed just below breakeven at 2,884.43 to post a three-day losing streak. The Nasdaq Composite also pulled back 0.7 percent to 7,735.95, posting its third straight losing session, as large-cap tech shares fell. Shares of Amazon fell 1.3 percent while Netflix pulled back 0.6 percent. Apple also dipped 0.2 percent.

Interest rates were on a tear last week after the release of several pieces of strong economic data. The benchmark 10-year Treasury note yield rose to above 3.2 percent from around 3.06 percent. The 10-year yield also hit its highest level since 2011 last week.

"The rise in interest rates was sparked by signs that the economy is beginning to run hot," said Bruce Bittles, chief investment strategist at Baird. "Looking forward, profit margins could come under stress due to rising interest rates, rising wages, four-year highs in energy costs and a strong dollar. We recommend investors concentrate on the strongest sectors including health care and industrials."

Read more: https://www.cnbc.com/2018/10/08/us-markets-watch-markets-overseas-and-economy.html

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While Trump will blame the Fed, the real culprit is the rise in long term rates due to the deficit explosion caused by Republican tax cuts.

The economy was near full employment at the start of Trump’s presidency, but to generate short term political momentum, Republican decided to cut billions in taxes as a stimulus.