Dow skids around 400 points lower as rising bond yields spark equity selloff

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U.S. equity benchmarks fell sharply Tuesday morning, arsenic Treasury yields extended their climb, putting unit connected the tech assemblage and growth-oriented shares.

How are stocks trading?
  • The Dow Jones Industrial Average DJIA, -1.36% fell 402 points, oregon 1.2%, to 34,469.
  • The S&P 500 SPX, -1.83% was down 72 points, oregon 1.6%, astatine 4,370.
  • The Nasdaq Composite COMP, -2.56% dropped 348 points, oregon 2.3%, to 14,622.

On Monday, the Dow Jones Industrial Average roseate 71 points, oregon 0.2%, portion the S&P 500 declined 0.3% and the tech-heavy Nasdaq Composite dropped 0.5%.

What’s the driving market?

Investors person been shunning authorities bonds since past week’s Federal Open Market Committee meeting, arsenic traders brought guardant expectations for the archetypal interest-rate summation into precocious 2022. Markets are besides giving astir 50% likelihood the European Central Bank volition articulation the Fed with a complaint summation adjacent year.

The 10-year Treasury output TMUBMUSD10Y, 1.521% was up 6.2 ground points astatine 1.541% aboriginal Tuesday, hitting its highest level since June.

Rising semipermanent enslaved yields person enactment unit connected tech- and different growth-related shares, portion stocks for companies much delicate to the economical rhythm were besides succumbing to selling pressure, but outperformed much rate-sensitive stocks.

“Bottom line, the banal marketplace is being driven by the enslaved marketplace this week and if we spot bonds proceed to driblet (yields spike higher) past that volition effect successful further underperformance by maturation stocks and resistance the broader marketplace little portion stabilization successful yields would apt let for a rebound,” said Tom Essaye, laminitis and president of Sevens Report Research, successful a Tuesday note.

The speculation astir rising involvement rates adjacent twelvemonth is helping the U.S. dollar summation ground, arsenic the dollar scale DXY, +0.37% is present conscionable 1% beneath its 52-week intraday high.

Fed Chair Jerome Powell was speaking connected Tuesday in beforehand of the Senate Banking Committee with U.S. Treasury Secretary Janet Yellen connected the government’s effect to the coronavirus pandemic, and is owed connected Wednesday to talk astatine an ECB event.

Powell said immoderate of the proviso bottlenecks astatine the bosom of a spike successful ostentation person worsened.

“Powell would person to marque immoderate precise beardown arguments present to halt the existent emergence successful yields,” said Mark Grant, main planetary strategist astatine B. Riley Financial. “The 10 twelvemonth Treasury has present breached done its method absorption and things could get problematical.”

Grant said investors should beryllium selling bonds, and utilizing yield-paying exchange-traded and closed-end funds arsenic income substitutes.

Yellen, meanwhile, warned that the Treasury Department is apt to exhaust bonzer measures to support from defaulting connected its indebtedness if Congress hasn’t acted to rise oregon suspend the indebtedness limit by Oct. 18.

Read: What happens if the U.S. defaults connected its debt?

Energy markets are different root of concern, arsenic Europe and Asia combat for natural-gas supplies. The pb natural-gas declaration NG00, +3.35% has surged 138% this year.

The Conference Board said its scale of user assurance slid to a seven-month low of 109.3 this period from a revised 115.2 successful August.

Data connected Tuesday showed the U.S. commercialized shortage successful goods roseate 0.9% successful August to $87.6 billion.

The S&P Case-Shiller 20-city home-price scale roseate 19.9% successful the twelvemonth to July.

Which companies are successful focus?
  • Shares of Ford Motor Co. F, +1.38% were up 2% aft the car shaper announced plans to walk $11.4 cardinal to physique “mega-campuses” in Tennessee and Kentucky, to assistance proviso caller manufacturing capableness for electrical vehicles.
  • Thor Industries Inc. THO, +8.68% topped Wall Street expectations for its fiscal fourth-quarter profit, showing a year-over-year income gain arsenic request for recreational vehicles remained strong. Shares roseate much than 9%.
  • Shares of Aurora Cannabis Inc. ACB, +6.36% shook disconnected premarket losses, rising 5.6% aft the Canadian institution precocious Monday said income continued to decline portion losses mounted successful the last 3 months of its fiscal year.
  • The Wall Street Journal reported that Merck & Co. Inc. MRK, +0.11% was successful talks to get Acceleron Pharma Inc. XLRN, +2.21%, which has a marketplace worth of astir $11 billion. The study said a woody could beryllium announced this week if the talks don’t autumn apart. Acceleron shares were up 2.3%, portion Merck shares were down 0.5%.
How are different assets trading?
  • The ICE U.S. Dollar Index DXY, +0.37%, a measurement of the currency against a handbasket of six large rivals, was up 0.3%.
  • Oil futures pulled backmost from an earlier jump, with the U.S. benchmark CL00, -0.83% disconnected 0.3% astatine $75.24 a barrel. Gold futures GC00, -0.89% were down 0.8% astatine $1,736.90 an ounce.
  • In European equities, the Stoxx Europe 600 SXXP, -2.18% fell 1.9%, portion London’s FTSE 100 UKX, -0.50% shed 0.3%.
  • In Asia, the Shanghai Composite SHCOMP, +0.54% roseate 0.5%, portion the Hang Seng Index HSI, +1.20% roseate 1.2% successful Hong Kong. Japan’s Nikkei 225 NIK, -0.19% fell 0.2%.
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