Consumer companies experienced a decline as Treasury yields rose following remarks made by Federal Reserve Chairman Jerome Powell. These comments have raised concerns about a potential freeze in consumer borrowing and its impact on the housing market.
Labor Market Heats Up
Powell acknowledged that the central bank is closely monitoring recent data indicating a heated labor market. If this trend continues, he mentioned the possibility of additional interest rate hikes being necessary.
Furthermore, new weekly jobless claims reached a nine month high, resulting in further increases in Treasury yields.
Housing Market Takes a Hit
Sales of used homes, which make up the majority of the U.S. market, fell by 2% in September. This decline brings the sales rate to its lowest point in 13 years, indicating that the housing sector remains vulnerable to the effects of high interest rates.
The mortgage rates are currently at historic highs. With the recent advancement of 10-year Treasury yields, it is expected that mortgage rates will continue to rise.
Edward Moya, senior market analyst at foreign-exchange brokerage Oanda Group, commented on the situation, saying, "With low inventories and mortgage rates now above 8%, it should not come as a surprise that sales are declining."
Mixed Results for Consumer Giants
While L'Oreal's third-quarter sales saw a year-on-year increase, driven by growth in its cosmetics and consumer-products divisions, EssilorLuxottica experienced a slowdown in revenue growth during the same period. The decline was primarily attributed to sluggish sales of sunglasses. However, EssilorLuxottica remains confident in achieving its long-term financial targets.
On the other hand, shoe and leather goods manufacturer Salvatore Ferragamo reported a decline in sales for the first nine months of the year, causing its stock to slip.
Luxury Firms Lose their Appeal
Luxury firms, including LVMH, have recently disappointed with their sales reports, causing consumer spending to drop by 1.1% from the previous week, excluding auto purchases. This data comes from a survey conducted by Bank of America Global Research.
In conclusion, the rise in Treasury yields has raised concerns about consumer borrowing and its impact on the housing market. While some companies have managed to overcome challenges and achieve growth, others have experienced setbacks. The declining sales of luxury firms reflect a loss of appeal among consumers.
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