Investing.com - U.S. stocks fell on Tuesday as concerns brewed that the Federal Reserve will hike interest rates sooner than later, though Apple stocks advanced earlier after the tech giant unveiled two new phone models as well as a smartwatch.
At the close of U.S. trading, the Dow 30 fell 0.57%, the S&P 500 index fell 0.65%, while the NASDAQ Composite index fell 0.87%.
The Volatility S&P 500 index, which measures the outlook for market volatility, was up 6.64% at 13.50.
Expectations that borrowing costs are poised to rise in the U.S. took their toll on Wall Street Tuesday, especially as Treasury yields rose.
A Federal Reserve Bank of San Francisco report released on Monday hinted that markets may be underestimating the pace at which rates may rise, evidenced by low volatility.
"Recently, subdued levels of volatility in financial markets have received some attention. For example, Federal Reserve Chair Janet Yellen (2014) noted that 'indicators of expected volatility in some asset markets have fallen to low levels, suggesting that some investors may underappreciate the potential for losses and volatility going forward,''" the report read.
"Prices of financial assets, such as stocks and bonds, are sensitive to unexpected changes in interest rates because their present values are determined by discounting future cash flows. Thus, the low volatility in asset markets could, in part, reflect market participants’ relative certainty about the future course of interest rates."
Stocks fell as investors repositioned themselves for the end of ultra-loose monetary policies that have remained in place since the 2008 financial crisis.
Retail sales and consumer sentiment reports are due out on Friday, and expectations for solid readings also fueled talk that the Federal Reserve at its Sept. 16-17 meeting may hint or even unveil at a timetable as to when rates may rise.
Apple Inc (NASDAQ:AAPL) shares rose after the company unveiled two larger-screen phones and a smartwatch, though by closing, prices ended down 0.38%, mainly on concerns that while Wall Street applauded the new products, macroeconomic factors took center stage for Apple and most other stocks.
Leading Dow Jones Industrial Average performers included UnitedHealth Group Incorporated (NYSE:UNH), up 0.74%, Microsoft Corporation (NASDAQ:MSFT), up 0.62%, and Coca-Cola Company (NYSE:KO), up 0.38%.
The Dow Jones Industrial Average's worst performers included Home Depot Inc (NYSE:HD), down 2.08%, McDonald's Corporation (NYSE:MCD), down 1.52%, and Goldman Sachs Group Inc (NYSE:GS), down 1.50%.
European indices, meanwhile, ended the day lower.
After the close of European trade, the DJ Euro Stoxx 50 fell 0.69%, France's CAC 40 fell 0.50%, while Germany's DAX fell 0.49%. Meanwhile, in the U.K. the FTSE 100 fell 0.08%.