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Dow Drops Over 150 Points as Rising Yields Worry Investors

This article was originally published on ETFTrends.com.

Positive earnings from the likes of Bank of New York Mellon, BB&T and Danaher were overshadowed by rising yields in the early trading session on Thursday as benchmark Treasury yields rose across the board, causing the Dow Jones Industrial Average to fall by over 150 points.

In part, Treasury note yields were partly to blame for last week’s stock sell-off as benchmark notes went on a weeklong ascent in the week prior, pushing to new highs that caused investors to fret. Today, those jitters returned with the benchmark yields ticking higher as the 10-year note went to 3.213, while the 30-year note was at 3.384 as of 10:15 a.m. ET.

Short-duration yields were up as well with the 2-year note rising to 2.907 and the 5-year note heading up to 3.068.

"The bottom line is that the long end of the US yield curve has managed to break out for the first time in several years and that other developed market yields have also been moving higher," said Michael Shaoul, chairman and CEO of Marketfield Asset Management. "The fact that US yields only dropped slightly during last week's equity rout is a sign that little demand for these instruments was sitting on the sidelines and there are already signs that the long bond is ready to revisit its recent high at 3.44 percent."

Related: A 3X Industrial ETF for Earnings Excitement

The housing sector took a dip as Bank of America Merrill Lynch downgraded movers and shakers in the homebuilder sector, including Toll Brothers, PulteGroup and NVR.

"This morning BofA Merrill Lynch's US economics team lowered its 2018-2019 housing starts and new home sales forecasts and thus we slightly temper our macro housing assumptions," said analyst John Lovallo.

Homebuilder ETFs were down like the iShares US Home Construction ETF (ITB) , SPDR S&P Homebuilders ETF (XHB) and the Invesco Dynamic Building & Construction ETF (PKB) . ITB was down 1.13%, XHB fell 1.27% and PKB slipped 0.89%.

Yesterday, the Commerce Department revealed that housing starts by fell 5.3% in September, which was more than analyst expectations. Per Marketwatch, "Builders broke ground on fewer homes in September, and applied for fewer permits to start future projects, another signal that residential construction faces daunting headwinds that will limit the supply of new housing stock."

"The pace of single family home building has slowed over the past 4 months," said Peter Boockvar, chief investment officer of The Bleakley Advisory Group, in a note. "Price inflation along with higher mortgage rates has turned off interested buyers."

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