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Dow slips as term premium rises and Fed hike odds cool
The Dow is about 2.5% below its Aug. 5 record near 54,750, while the 30-year Treasury yield trades around 5.3% after a week and a half of reduced September to December hike certainty.
FXStreet said the Dow Jones Industrial Average has come under pressure as market pricing for Federal Reserve tightening has shifted, with spot trading near 53,400, down roughly 105 points on the session. The outlet noted the index is about 2.5% below its record just under 54,750 set on August 5, and that nine sessions have passed without a new high.
The analysis points to changing expectations for meeting outcomes, with conditional meeting probabilities showing a hold at 65.4% for September 16 and 52.4% for October 28, while the December 9 hold probability is 33.0%. FXStreet added that on August 10 the December meeting had been priced as a certainty for an increase, implying only about a third of terminal tightening remains in the curve.
FXStreet argued that the key driver is not the near-term policy path but widening term premium, described as the compensation for holding duration. It cited a 30-year Treasury yield around 5.3%, its highest since June 2007, and referenced higher long-end yields in Japan, Germany, and France as evidence the move is broader than the US.
The piece also connected the long-end rate backdrop to housing data, noting July building permits of 1.443 million versus a 1.37 million consensus and housing starts of 1.239 million versus 1.35 million expected. It further said pending home sales fell 2.3% in July after a 0.3% gain was expected, and that the long end of the mortgage market is being affected rather than pricing tied to the funds rate.
Latest closeDow Jones 53,732.41 ▼0.2%