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S&P 500 Slumps as Yield Spike Triggers Tech Tantrum

Stock MarketsSep 28, 2021 04:23PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 slumped Tuesday, as surging Treasury yields triggered a sea of red in tech at a time when economic data flagged weakness in the consumer.    

The S&P 500 fell 2%, the Dow Jones Industrial Average slipped 2%, or 569 points, the Nasdaq slumped 2.8%.

The U.S. 10-year Treasury yield topped 1.5%, rising to its highest level since June, as investors fret about the prospect of the Federal Reserve raising interest rates sooner than expected to control inflation.

"The many supply and demand imbalances, including new production constraints stemming from the pandemic and supply problems, could make inflation surge more than anticipated," Desjardins said in a note.

Some, however, believe it may too earlier to worry about a sooner rather than later liffoff in rates at a time when the Federal Reserve’s balance sheet shows there remains ample liquidity. 

“I don't think we've got enough data to suggest the Fed will lift rates soon,” Mike Skillman who is CEO of Faith Investor Services told Investing.com in an interview Tuesday. "The U.S. central bank is going to be cautious on rate hikes, until it's very clear that inflation will be longer and more problematic than they believe it is today."

Tech was shunned as growth sectors of the market -- with earnings that are further out into future -- become less attractive in a rising rate and inflationary environment, where money today is more valuable than money in the future.

Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), Google-parent Alphabet (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) ended more than 2% lower.

Chip stocks pushed the broader tech sector further into the red, ASML (NASDAQ:ASML), Applied Materials (NASDAQ:AMAT) and Teradyne (NASDAQ:TER) the biggest decliners.

In a raising rate environment, “you want more exposure to financials, and industrials … as they have a higher proportion of fixed costs than just all labor costs [when compared] to tech companies," Skillman added.

Energy was the sole sector in the green, despite oil prices paring gains as investors continue to expect rising energy will persist amid supply-chain bottlenecks and improved energy demand.

On the economic front, consumer confidence fell well short of investor expectations as the impact of the delta variant weighed on sentiment.

The Conference Board’s consumer confidence index fell unexpectedly to a reading of 109.3 from 115.2, missing economists estimates for 115.0. 

"Just like what we have seen in the University of Michigan sentiment data of the past two months, it looks like consumers are feeling the pain of disappointment caused by the Delta variant of COVID," Jefferies (NYSE:JEF) said in a note.

In other news, Ford Motor (NYSE:F) unveiled plans to invest in a new assembly plant and three battery factories, in an effort to speed up its push into electric vehicles.

S&P 500 Slumps as Yield Spike Triggers Tech Tantrum
 

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Comments (16)
Ac Tektrader
Ac Tektrader Sep 28, 2021 10:08PM ET
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mr Edwards.. the people who "control " the bond market are not the sellers of bonds to the retail market. they are the American Federal, Reserve and foreign central Banks; the stock markets are indirectly controlled by hedge funds investment banks and large multinational Corporations. their actions are supported and indirectly financed by policies of the Federal Reserve and worldwide central Banks. when these po!icies are changed, and or a number of these entities loose control because of some unforseen event(s), markets becomes unstable and can lead to extreme dislocation and breakdown. again your argument seems to be revolving around the idea that there is a us versus them conspiracy going on. this about creating financial stability on a planet with 7 billion people.
satoshi nakomoto
satoshi nakomoto Sep 28, 2021 9:33PM ET
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these photos of sad traders is laughable.they wouldn't be so sad if they knew better than chasing their own tails
ron king
ron king Sep 28, 2021 8:35PM ET
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so an article writer/fud spreader knows this is what happened? bs
Miles Mathewson
Miles Mathewson Sep 28, 2021 7:36PM ET
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This is nothing. We all want to buy a DIP, but not this blip, a real >20% one..hope it's coming
Casador Del Oso
Casador Del Oso Sep 28, 2021 6:54PM ET
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watch VIXX, when it's between 80-90 the bottom should be in.
Ac Tektrader
Ac Tektrader Sep 28, 2021 6:54PM ET
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that maybe possible, but only if there's a black swan event.
Ac Tektrader
Ac Tektrader Sep 28, 2021 6:50PM ET
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the technicals have been suggesting a major correction coming in the next 2 weeks. the charts are starting to remind me of early October 1987...at the close the SP500, signaled a rally overnight and into tomorrow's trading.
Meru Pet
Meru Pet Sep 28, 2021 6:42PM ET
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the tantrum was so insane that tesla lost nearly 2%. I am not gonna lie, i was scared...
Maksut Kamberi
Maksut Kamberi Sep 28, 2021 6:38PM ET
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100%
JAMES CUNHA
JAMES CUNHA Sep 28, 2021 6:25PM ET
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"Tech tantrum?"  The NASDAQ has doubled in value within a 20 month period.  This is not the norm.  Indices are not supposed to appreciate that quickly. It now has to deflate to avoid an asset bubble collapse. imo  Once it deflates to a lower value, people will start buying up again.
JP BW
JP BW Sep 28, 2021 6:25PM ET
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It is not about people buying… people got nothing to do with shares, they drive demand, and this is another universe. The demand of shares is materrially irrelevant if compared to the demand of the end product of the listed companies. My view
New Jazenevd
New Jazenevd Sep 28, 2021 6:09PM ET
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A senile fool on top of quote-filled administration. Certainly, consumers are not confident and they will pay for the foolishness bringing inflation higher. On the other hand, stock investors are in better position than ordinary consumers. Stock prices inflate too and this goes faster than for bread and milk prices.
Mark Manley
Mark Manley Sep 28, 2021 5:16PM ET
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Here's an idea - take those stimulus checks and buy a freakin backbone
Mark Manley
Mark Manley Sep 28, 2021 5:15PM ET
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Fed: we're not gonna make changes. Investors: run for your lives, the sky is falling, aaaaaaa
Marco cuevas
Marco cuevas Sep 28, 2021 5:15PM ET
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Wait first they have to get their PUTS in.
Charles Cartwright
Charles Cartwright Sep 28, 2021 5:10PM ET
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I am in my forth year in 5his space threes years paper trading while working last year removed the training wheels safty net so learning curve started so a frind asked me is this sell off goinggto contiue after readibs this note i have an idea and know what to look for thanks
Adrian White
Adrian White Sep 28, 2021 5:10PM ET
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No offense, but it looks like you still need you training wheels for basic spelling and construction of sentences. ;-)
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 28, 2021 5:02PM ET
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Will Kamala Harris play the villian of the decade?
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 28, 2021 5:01PM ET
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bond market decides rates not the Fed
Ac Tektrader
Ac Tektrader Sep 28, 2021 5:01PM ET
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apperently Mr. edwards is not familiar with the bond markets or how America's market system works.
Hounss John
Hounss John Sep 28, 2021 4:40PM ET
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Hello how are you doing today
 
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