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Wall Street swoons on rising Treasury yields, growing inflation worries

EconomySep 28, 2021 06:51PM ET
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© Reuters. FILE PHOTO: A street sign is seen in front of the New York Stock Exchange on Wall Street in New York, February 10, 2009. REUTERS/Eric Thayer/File Photo

By Stephen Culp

NEW YORK (Reuters) - Wall Street stocks ended sharply lower on Tuesday in a broad sell-off driven by rising U.S. Treasury yields, deepening concerns over persistent inflation, and contentious debt ceiling negotiations in Washington.

All three major U.S. stock indexes slid nearly 2% or more, with interest rate sensitive tech and tech-adjacent stocks weighing heaviest as investors lost their risk appetite.

It was the S&P 500 index's biggest one-day percentage drop since May, and the Nasdaq's largest since March.

The S&P 500 and the Nasdaq Composite index were on track for their largest monthly declines since September 2020.

"The big picture is the sudden surge in the past week of yields, which has led to a 'sell first, ask questions later' mentality," Ryan Detrick, senior market strategist at LPL Financial (NASDAQ:LPLA) in Charlotte, North Carolina.

"(But) there are multiple factors weighing on sentiment today," Detrick added. "The back-and-forth in Washington with the debt ceiling and the spending bill and potential higher taxes have weighed on overall investor psyche and has led to a pretty good sized sell-off."

The benchmark index was also setting a course for its weakest quarterly performance since the COVID pandemic brought the global economy to its knees.

Weakness pervaded across most asset classes, including gold, suggesting widespread risk-off sentiment.

U.S. Treasury yields continued rising, with 10-year yields reaching their highest level since June, as inflation expectations heated up and fears grew that the U.S. Federal Reserve could shorten its timeline for tightening its monetary policy.

Treasury Secretary Janet Yellen said she expected inflation to end 2021 near 4% and warned lawmakers their failure to avert a government shutdown as the nation moves closer to exhausting its borrowing capabilities could cause "serious harm" to the economy.

Senate Republicans appeared set to strike down Democrats' efforts to extend the government's borrowing authority and avoid a potential U.S. credit default.

A Conference Board report showed consumer confidence weakened unexpectedly in September to the lowest level since February.

The Dow Jones Industrial Average fell 569.38 points, or 1.63%, to 34,299.99; the S&P 500 lost 90.48 points, or 2.04%, at 4,352.63; and the Nasdaq Composite dropped 423.29 points, or 2.83%, to 14,546.68.

Half of the S&P 500's components closed 10% or more below their 52-week highs. That included 63 stocks that had fallen 20% or more.

Among the 11 major sectors of the S&P 500, all but energy ended red, with tech and communications services suffering the steepest percentage losses.

Communications services shed 2.8%, the sector's biggest one-day percentage decline since January. The S&P growth index closed at its lowest since July and posted its biggest one-day percentage drop since February.

Microsoft Corp (NASDAQ:MSFT), Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) Inc weighed heaviest 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, advancing 1.1% on news that it would join Korean battery partner SK Innovation to invest $11.4 billion to build an electric F-150 assembly plant and three U.S. battery plants.

Declining issues outnumbered gainers on the NYSE by a 4.35-to-1 ratio; on Nasdaq, a 4.52-to-1 ratio favored decliners.

The S&P 500 posted 17 new 52-week highs and five new lows; the Nasdaq Composite recorded 54 new highs and 120 new lows.

Volume on U.S. exchanges was 12.27 billion shares, compared with the 10.37 billion average over the last 20 trading days.

Wall Street swoons on rising Treasury yields, growing inflation worries
 

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Comments (16)
Horyu Ken
Horyu Ken Sep 29, 2021 2:48AM ET
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Mmmm.....high yields = rapid selloff, inflation + high tax and interest rates = too hot too handle, debt ceiling - quantitative easing + fiscal stimulus + extension of monetary policy timeline by the Federal Reserve for zero inflation by 2021.
John Niemokta
John Niemokta Sep 28, 2021 8:11PM ET
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Market will continue to drop. NQ will see 12500 again or close to it.
Kareem Sultan
Kareem Sultan Sep 28, 2021 4:30PM ET
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This is fake and in my opinion these kind of traders are enlarging the effect of news to make you loose your money.
Dave Jones
Dave Jones Sep 28, 2021 2:53PM ET
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everything is awesome
Robert Pilepic
Robert Pilepic Sep 28, 2021 2:02PM ET
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It would be epic this time
Darrell Peterson
Darrell Peterson Sep 28, 2021 1:58PM ET
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Wait for it . 2maro the headines will be a 180 , everything is spectacular disregard yesterdays doom and gloom , carry on ,
dar dar
dar dar Sep 28, 2021 1:55PM ET
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this time next year the 10 year will be negative obviously in my humble opinion
Mitchel Pioneer
Mitchel Pioneer Sep 28, 2021 1:24PM ET
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Another round of criminal intervention begins, as the loss removal commences in earnest.  How many points in losses will get whisked away this round?  Welcome to the US Ponzi Scheme, greatest financial fraud in history, and laughingstock of the investing world.
Antonio Velardo
Antonio Velardo Sep 28, 2021 1:24PM ET
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Why disappointed if losses are recovered. It should be good for economy, labour market etc..
Cornel Pod
Cornel Pod Sep 28, 2021 1:09PM ET
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Hey Devik, for your info US10Y is highly correlated with SPX. Also if the other reason is consumer confidence, then TLT would be rising NOT the US10Y yields! So it's another BS explanation for this. Why don't you try looking at the DAX (German stock market) which is correlated with the US SPX and happens to be the EU largest economy?? Okay Germay DE30Y are also rising. Journalists should take some econ course in college in my humble opinion. FAKE NEWS article.
Olga Haldemann
Olga Haldemann Sep 28, 2021 1:09PM ET
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It is written here that 10Y yields are raising because investors have "priced in" the inflation vorries. How would that happen, technically? :) wouldn't it just do the opposite to the yields? Now investors are looking what is better : descending gold or questionable national debt and would be pricing inflation in bitcoin. I mean, if inflation really was such big concern.
Pratt Man
Pratt Man Sep 28, 2021 12:45PM ET
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The only printing of money in the last 5 years was trump's tax cuts. which weren't paid for.
Kris Luis
Kris Luis Sep 28, 2021 12:45PM ET
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Spoken like a true leftist. Any chance the government could spend less?
Tommy Rommazontz
Tommy Rommazontz Sep 28, 2021 12:45PM ET
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it was paid for with the lowest unemployment rate in decades as well as the largest increase in wages. Every aspect of your life was improved under Trump, except your feeeeelings
Josh Davis
Josh Davis Sep 28, 2021 12:45PM ET
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Tommy Rommazontz also qe started under whos watch? Obama lol and it never quit in over 13 years lol
Pratt Man
Pratt Man Sep 28, 2021 12:42PM ET
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consumer sentiment is great in the blue states because we're all vaccinated.
Josh Davis
Josh Davis Sep 28, 2021 12:42PM ET
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paul mcewen shhh dont tell them that lol
Mark Schroeder
Mark Schroeder Sep 28, 2021 12:42PM ET
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Good point. Seattle is far and away positive as trade, infrastructure, healthcare, vaccination rates are climbing. Whereas in TX where i moved from, they are embrioled in culture wars, cadavers are being stacked in freezer trailers behind nearly full ICUs, home property taxes are at all time highs, the plug was pulked on UI was pulled early, evictions are well under way, yet there’s no thought about coordinating policies towards what’s good for business or families. In TX, its about pointing fingers at a particular race, rsther than cooperating. As TX is a fair proxy for the entire south, lower consumer confidence is spreading across the whole region.
Olga Haldemann
Olga Haldemann Sep 28, 2021 12:42PM ET
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So blue states are driving inflation :)
Ricardo Diogo
Rcd72 Sep 28, 2021 12:31PM ET
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stop printing 💰💸💸raise interest or signal itempty the Ponzi before it blowscovid argument is on people hand if you don't want to get the vaccine it your problem
Show previous replies (1)
tim banks
tim banks Sep 28, 2021 12:31PM ET
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80% of the tax cut went to the wealthiest 20%.. I remember people bragging about their extra 2 bucks a paycheck. even paul Ryan retweeting that 2 bucks extra story as a brag. it was pathetic. Biden already gave more in stimulus to the middle class than trumps tax cuts did
Josh Davis
Josh Davis Sep 28, 2021 12:31PM ET
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tim banks the tax cuts made americans the niddle class approximately 6500 more dollars per year. Nice fantasy land you live in though. The stimulus has to be paid for by you and i. No thanks get back to work like the rest of us.
Olga Haldemann
Olga Haldemann Sep 28, 2021 12:31PM ET
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Ooo! I see. They are not getting along on the specific way to damage the cycle. This is why the debt ceiling is pending. :) :) :)
Chris Fran
Chris Fran Sep 28, 2021 12:31PM ET
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6500? that's 2 weeks of work.. peanuts.. I wonder how much Mitt Romney saved.
tim banks
tim banks Sep 28, 2021 12:31PM ET
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you're a liar. avg middle class got 780 or less. whole rich got 50000 or more. you live in a fantasy land.
Terence Williams
Terence Williams Sep 28, 2021 12:30PM ET
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Sentiment, confidence.. Bottom line ..does anyone have much trust in policies and leadership of the USA ?
tim banks
tim banks Sep 28, 2021 12:30PM ET
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absolutely. I dont have to worry about trump starting world War 3 and a more competent government than the dregs trump had to recruit because he fired everyone
Mark Stallone
Mark Stallone Sep 28, 2021 12:04PM ET
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RELAX. It's all part of Building Back "Better".
John Klan
John Klan Sep 28, 2021 11:48AM ET
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Liberal media spreading lie that consumer sentiment is weak because of covid. No it's weak because we have a president who has no clue what's going on. He's a puppet with his strings being pulled by folks on the far far left radical wing of their Socialist party.
tim banks
tim banks Sep 28, 2021 11:48AM ET
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you live in Mississippi? has the highest deaths per capita.
Stefan Kunco
Stefan Kunco Sep 28, 2021 11:47AM ET
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What the two are doing here in the last six months is unparalleled
 
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