Rising bond yields cause Wall Street to collapse
US consumer confidence at its lowest level since February.
Wall Street stocks closed significantly lower on Tuesday in a broad sell-off triggered by rising US Treasury yields, mounting concerns over sustained inflation and controversial Washington debt ceiling negotiations.
All three major US stock indices were down nearly 2% or more, with interest rate-sensitive technology stocks and their related stocks hurting the hardest as investors lost their risk appetite.
For the S&P 500 index it was the largest percentage decline in a day since May and for the Nasdaq index the largest since March.
The S&P 500 and Nasdaq Composite Index were on their way to their biggest monthly declines since September 2020.
"The big picture is the sudden surge in yields over the past week that has resulted in a 'sell, then ask' mentality," said Ryan Detrick, senior market strategist at LPL Financial (NASDAQ: LPLA) in Charlotte, NC .
"But there are several factors that are weighing on the mood today," added Detrick. "Washington's back-and-forth over the debt ceiling and budget bill, as well as possible tax hikes, have weighed on the general psyche of investors and resulted in a pretty big sell-off."
The benchmark index was also heading for its weakest quarterly performance since the COVID pandemic brought the global economy to its knees.
The weakness ran through most asset classes, including gold, suggesting widespread risk aversion.
US Treasury bond yields continued to climb, with 10-year yields hitting their highest level since June as inflation expectations increased and fears grew that the US Federal Reserve might shorten its monetary tightening schedule.
Treasury Secretary Janet Yellen said she expected inflation to hit 4% by the end of 2021 and warned lawmakers that if they fail to avert a government shutdown as the nation turns, they could do "serious damage" to the economy closer to the exhaustion of their borrowing capacity.
Senate Republicans appeared to be preparing to thwart Democrats' efforts to extend the government's borrowing authority and avoid a possible US default.
According to a report by the Conference Board, consumer confidence fell unexpectedly in September to its lowest level since February.
The Dow Jones Industrial Average fell 569.38 points, or 1.63%, to 34,299.99, the S&P 500 fell 90.48 points, or 2.04%, to 4,352.63, and the Nasdaq Composite fell 423.29 points, or 2 .83% to 14,546.68.
Half of the components of the S&P 500 closed 10% or more below their 52-week highs. Among them were 63 stocks that were down 20% or more.
Of the 11 major sectors of the S&P 500, all but energy closed in the red, with technology and communications services taking the largest percentage losses.
Communication services lost 2.8%, the largest daily percentage decrease since January. The S&P growth index closed at its lowest level since July and recorded the largest daily percentage decline since February.
Microsoft Corp (NASDAQ: MSFT), Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN), and Alphabet (NASDAQ: bitten) Inc were the biggest drag on the S&P and Nasdaq, falling between 2.4% and 3 , 6%.
Ford Motor (NYSE: F) Co was one of the few bright spots, up 1.1% after it was announced it was partnering with Korean battery partner SK Innovation to build an electric F-150 with $ 11.4 billion Assembly plant and three battery plants in the United States.
On the NYSE, the relegators outnumbered the newcomers at a ratio of 4.35 to 1; on the Nasdaq, the relegated teams had an advantage of 4.52 to 1.
The S&P 500 posted 17 new 52-week highs and five new lows; the Nasdaq Composite made 54 new highs and 120 new lows.
The volume on the US stock exchanges was 12.27 billion shares, compared with the average of the last 20 trading days of 10.37 billion.