Benchmarks closed in the red on Tuesday as climbing yield exerted pressure on tech and growth stocks. The rise in U.S. Treasury yield, concerns over persistent inflation, and stalemate on debt ceiling negotiations in Washington led to broad sell-off in the market.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 569.38 points, or 1.6%, to close at 34,299.99. The majority of the stocks of the blue-chip index ended in the red with Microsoft Corporation MSFT leading the decline with a 3.6% loss. Microsoft carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 slid 90.48 points, or 2%, to close at 4,352.63 on Tuesday, its worst single-day drop since May 12. Of the 11 sectors of the broader index, only the energy sector closed in the green, with a 0.5% gain. The technology sector declined nearly 3% followed closely by communications services and consumer discretionary that ended 2.8% and 2% lower, respectively.
The Nasdaq Composite Index closed at 14,546.68, after declining 423.29 points, or 2.8%, its worst day since March. Tech bigwigs like Alphabet Inc. GOOGL and Facebook, Inc. FB fell 3.7%, while Apple Inc. AAPL and Amazon.com, Inc. AMZN declined at least 2.4%. The tech-laden index’s highest decliner was Pinduoduo Inc. (PDD) sliding 7.6%.
On Tuesday, the fear-gauge CBOE Volatility Index (VIX) increased 23.9%, to close at 23.25. The S&P 500 posted 17 new 52-week highs and five new lows, while the Nasdaq Composite recorded 54 new highs and 120 new lows. Declining issues outnumbered advancing ones on the NYSE by a 4.35-to-1 ratio, while a 4.52-to-1 ratio favored decliners on Nasdaq. A total of 12.27 billion shares were traded yesterday, higher than the last 20-session average of 10.37 billion.
Investors ill at Ease on Rapid Climb in Treasury Yield
On Tuesday, the U.S. Treasury yields continued rising, with the 10-year yields reaching their highest level since June, rising for the six straight trading days to 1.534%. Rise in long-term bonds yields put pressure on tech and growth-related stocks, as inflation fears grow due to supply chain issues and reopening pressures. Additionally, the Federal Reserve’s plans to shorten its timeline for tightening monetary policy.
On the other side, investors are also keeping a close eye on Washington where Senate Republicans are hindering Democrats’ efforts to extend the government’s debt ceiling and avoid a potential credit default. The Congress needs to approve government funding by Oct 1 to avoid a shutdown and need to raid the debt limit by Oct 18.
Consumer Confidence Slid to 7-month Low
The US Conference Board reported on Sep 28 that its consumer confidence dropped to 109.3 in September as the spread of the Delta variant continued to dampen optimism. The figures are much lower than the consensus estimate of 115.3 and August’s revised figure of 115.2. This seven-month low consumer confidence is due to the rapid spread of coronavirus’ delta variant and high inflation pushing consumers to put off big purchases. However, consumers are optimistic about the job market as 55.9% believe that jobs are “plentiful.”
In a separate report, the S&P Dow Jones Indices reported yesterday that U.S. home prices have continued to rise in July. Per its Case-Shiller U.S. National Home Price NSA Index, the price of 10-City Composite rose 1.3% in July, while the 20-City Composite edged up 1.5%.
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