Shares of banks and other financial institutions experienced a decline as House Speaker Kevin McCarthy faced the possibility of losing his position, which has raised concerns about a potential government shutdown within the next 45 days.
House Speaker McCarthy was ousted in a House of Representatives vote that took place after the market closed. This unexpected development has caused unease in the bond markets, with investors expressing frustration over the dysfunction in Congress.
“Investors are fed up with the lack of control over spending, the inability to govern, and the constant risk of shutdowns and debt-ceiling disputes that continually push markets to the brink of economic collapse,” stated Jamie Cox, managing partner for financial advisory firm Harris Financial Group.
The yield on the 30-year Treasury bond surged to its highest level since 2007 following positive job data, leading to speculation that the Federal Reserve will need to maintain interest rates at elevated levels to manage inflation.
In contrast, China Evergrande Group’s shares experienced a sharp rise as trading resumed for the troubled property developer after a previous suspension.
However, shares of Charles Schwab, LPL Financial, Raymond James Financial, and other wealth management companies faced a decline due to concerns that increasing deposit rates at banks, linked to the surge in Treasury yields, would prompt a shift away from “cash sweep” brokerage accounts.
