Market Wrap-Up for May 29 (SFD, TSN, F, more)

Market Wrap-Up for May 29 (SFD, TSN, F, more)


After starting off yesterday’s session with quite a bit of momentum, the markets steadily declined throughout the day. The retreat continued today, with the indices closing in the red. It seems as though investors’ fears of the end of QE helped reignite the sell-off that we experienced late last week.

Big M&A activity stole the headlines early today. According to a report, Smithfield Foods (SFD), the US’s largest pork company, will be acquired by a Chinese food processing company for $4.7 billion. As such, Smithfield’s shares were up sharply during trading, causing dividend-paying competitor Tyson Foods (TSN) to see its shares close in the green as well.

Furthermore, funeral service company Service Corporation International (SCI) said it was acquiring Stewart Enterprises (STEI). As a result, both companies’ shares shot up to positive territory.

Aside from the M&A news, a couple of Wall Street analysts’ upgrades helped shares of Ford (F) and Prudential (PRU) rise higher, despite an overall down market.

The Impact of Rising Interest Rates

Often investors focus most of their attention to the stock market, and rightly so. Investing in equities on the stock market is the best ways to see a long-term accumulation of wealth. However, the stock market isn’t the only financial market out there in which investors should pay attention to. In fact, the bond market, whether you invest in bonds or not, plays an important role in the overall investing landscape.

Currently, the bond market has started to see a rise in interest rates. The 10 Year US Treasury Note, typically used as the benchmark of the overall bond market landscape, has seen its rate increase roughly 50 basis points over the past month. For the past year, the rate of the 10 Year T-Note is up 40 basis points, hovering around 2.15%.

It is well documented that we have been operating in an extremely low interest rate environment due to the Federal Reserve’s zero interest rate policy. However, the bond market is signaling that the consumer bond rates may have hit a bottom, which could result in an impact that trickles down through the economy. Though it is a slow process, these rising interest rates will eventually lead to higher rates in savings accounts, mortgages, and CD rates, all of which can have significant impacts to investors.

However, there are many analysts and economists out there who warn of the negative impacts of rising bond rates, especially as the Federal Reserve gives hints of tapering its quantitative easing. If the Fed does indeed slow down its bond buying activities, this sudden shock to the market, where the Fed’s big demand of bonds no longer drives up the prices, could result in losses for investors in both the bond market and the stock market. Of course, this could all be a head-fake and the Federal Reserve could do nothing when it comes to its current strategy. At that point, rates could stop shooting higher, resulting in the continuation of near record-low rates.

It just goes to show that there are a lot of moving parts that investors must keep an eye on to stay ahead of the game. Though there are many doomsday predictors out there warning investors of all the negative things ahead for the economy, staying up to date with the latest happenings across the financial markets can ensure that you have the knowledge to help maneuver around any obstacles ahead.

Thanks for reading; we’ll see you tomorrow!

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