Trump blames stock market drop on Federal Reserve

US stocks have plunged to their worst loss in eight months

The foundation at the center of the investment world is shaking. It is not a solicitation to make any exchange in commodities, securities or other financial instruments.

Bond yields, which have spiked over the last week, slid after the Labor Department said consumer prices grew only slightly in September.

The benchmark USA 10-year Treasury bond usually offers a lower return, or yield, than a typical index fund that tracks the S&P 500. The S&P 500 index closed lower for a sixth straight day. Unemployment in September fell to its lowest rate in almost half a century. They understood that raising even the specter of a compromised Fed was just too risky. Housing construction is slowing - whether the cause is rising interest rates, overbuilding or some complex combination of factors is hard to say. The Fed was plowing ahead with rate increases, while investors were evidently skeptical that growth would be persistent enough to justify higher long-term rates.

For much of the last couple of years, short-term interest rates, which the Fed controls directly, have risen much faster than longer-term rates, which are set based on global supply and demand for bonds. (See also: The 2007-2008 Financial Crisis In Review).

"In the absence of a specific trigger, investors are now voting with their feet due to mounting concerns around trade tensions and the impact on global growth, higher interest rates in the USA, and a potential rotation away from equities due to rising bond yields", said Richard Hunter, head of markets at Interactive Investor. Inflation is still relatively tame but may be showing more signs of life.

"Investors are laser-focused on rising bond yields as this has caused agita for both fixed-income as well as equity investors over the past week", Daniel Ives, managing director of equity research at Wedbush Securities, said in an email to CBS MoneyWatch. When a bond's price falls, its yield rises, and the 30-year Treasury yield rose above 3.40 percent at one point October 10, up from 2.89 percent a year ago. Simply put, stocks are sinking as Treasury rates spike.

Higher rates generally hurt stock prices for a few reasons.

Economists generally view the recent rate increases as a natural response to improved growth.

"It is clearly a necessary development for those economies that are showing much improved growth, inflation that is picking up... unemployment that is extremely low", she told a press briefing in Bali held on the sidelines of annual International Monetary Fund and World Bank meetings in the city. "He likes low interest rates". "They're raising interest rates and it's ridiculous".

Tech and luxury stocks have been among those to feel the worst pain in the sell-off.

But the falls are now spreading beyond technology stocks.

The 10-year Treasury yield hit 3.24% on Wednesday for the first time in seven years.

That looks different for each person, and in the case of saving and investing for retirement, it's heavily influenced by an investor's age. "They are independent; they're going to do what they're going to do". "I expect rates will continue to go up". Higher rates have increased your automobile-loan payments, increased the cost of gasoline getting to market and raised the cost of fuel and heating oil. Such tariffs cause inflation by pushing up the price of imports, making it more likely that an inflation-wary Fed will counter with rate hikes.

The resurgent economy suggests that it's time to pump, not slam, the brakes on the economy or risk the kind of inflationary spiral that America experienced in the 1970s. On Thursday, the US core consumer price index for September came in at 2.2 per cent.



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