After three consecutive monthly declines into late October due primarily to rising interest rates, a strong counter-trend rally emerged in both the bond and stock markets during November. This rally, propelled by a drop in the yield on the 10-year U.S. Treasury Note from over 5.00 percent in late October to 4.37 percent by month-end, resulted in an impressive 8.9 percent surge in the S&P 500 index.
By July 31, 2023, the yield on the 10-year Treasury had dipped below 4.00 percent. However, in a remarkably short span, it soared above 5.00 percent for the first time since 2007. This sharp increase in interest rates exerted downward pressure on equity prices.
October data revealed hedge funds heavily shorting U.S. Treasury securities and equity futures, reaching record levels, thereby betting on future price declines. Yet, with the release of October employment data indicating a mere 150,000 increase in payrolls – the smallest gain since January 2021 – and revisions of 101,000 jobs downward for the previous two months, bond interest rates declined as hedge funds rushed to cover their negative bets.