【My View on This Morning's Economy】US economic figures last night were better than expected. Yet, stocks fell.
One piece of news this morning
The US stock market closed its trading session on Wednesday, the 23rd (local time), at 5:00 AM Japan time. The Dow Jones Industrial Average, consisting of 30 representative companies, fell by 352 dollars. The Nasdaq Composite Index, which includes many high-tech companies, also dropped by 308 points, retreating from the record highs it had reached for two consecutive days.
During that trading session, economic figures were released at 10:45 PM Japan time last night. These were the preliminary figures for September for the ‘PMI,’ an index that summarizes business sentiment by surveying companies. The composite figure, which combines the service and manufacturing sectors, was 58.4. Since a figure above 50 indicates an improving economy, this significantly exceeded expectations.
Why did stocks fall despite a strong economy?
At first glance, it seems contradictory. If the economy is good, one would expect company profits to increase as well.
The factor in between is interest rates. Because a strong economy tends to drive up prices, it is reported that more people now believe the Federal Reserve (the US central bank) might raise interest rates further. Governor Waller of the Fed, which just raised rates last week, also spoke on the 23rd (local time) to the effect that it is highly likely that further measures will be needed to bring inflation down to the target level.
With this perspective, the yield on the 10-year US Treasury bond (the interest rate when lending money to the government for 10 years) reached around 5.10%. It was 4.96% the previous day. This level is the highest since July 2007.
When interest rates rise, the burden becomes heavier for companies that borrow money to conduct business. Some people also choose to receive interest from government bonds rather than stocks. It is reported that last night’s decline in stocks was driven by this rise in interest rates.
I distinguish between overnight reactions and long-term prospects
There are times when stocks fall on good economic news. In the short term, the market sometimes reacts to ‘what will happen to interest rates’ before ‘whether companies will be profitable.’
In society, it is sometimes said that ‘good news is bad news for stocks.’ As an explanation for the overnight price movement, I think that is correct.
However, the reason I continue to hold investment trusts linked to stock indices (products that allow you to own a collection of many companies’ stocks) is because I am looking at the growth of companies several years down the road. I believe that what will matter in the long run is the strength of the economy. I will keep last night’s figures in my records as evidence that ‘the economy was strong.’ I think it is fine for people to differ on where they place their emphasis.
A word for today
The Tokyo stock market opens at 9:00 AM today after a five-day holiday. Last night’s decline in the US is likely to be one of the factors that Tokyo will have to contend with after the break.
※ This article is for informational purposes only and does not recommend the purchase or sale of any specific financial product. Please make investment decisions at your own responsibility.
A detailed summary of the previous day’s market is also written in ‘Okane Bye-Bye Man’s Economic News’ ( https://okanebye-man.com ).
ichido-studio | Morning Economic Column | Thursday, September 24, 2026