Wall Street’s key indexes dropped on Tuesday as Treasury yields extended their multi-year-high rally after hotter-than-expected jobs data fanned fears of interest rates remaining higher for longer, dragging down megacaps.
The Dow Jones Industrial Average plunged 422 points, or 1.2%, to 33,014, the Nasdaq slipped 1.8% and the S&P 500 was down 1.5%.
Yields on 10-year and 30-year US government bonds hit their highest since 2007, pushing Apple, Tesla, Amazon, Alphabet and Microsoft lower between 0.8% and 2.5%.
After a stellar first half this year driven by the artificial intelligence hype, some investors believe megacap stocks could lose momentum as yields continue to rise.
“We’re in the middle of a historic move in the 10-year Treasury (yield) … the curve had been historically inverted and in many ways we’re just playing catch up,” said David Russell, global head of market strategy at TradeStation.
A Labor Department report showed 9.61 million job openings for August, higher than the 8.8 million estimated by economists polled by Reuters.
Investor focus will now shift to the ADP National Employment numbers and the more comprehensive non-farms payrolls report for further clues on the state of the US labor market.
Joining the chorus of several Fed officials, Atlanta Fed President Raphael Bostic said with the economy slowing and inflation falling, there was no urgency for the Fed to raise its policy interest rate again, but it will likely be a long time before it moves to cut rates.
The S&P 500 ended flat on Monday with utilities, often considered as a bond proxy, falling sharply on uncertainty over the interest rate trajectory, as the 10-year Treasury yield surged following a funding deal that averted a government shutdown.
Among individual stocks, Airbnb fell 4.1% after Keybanc downgraded the vacation lodging platform’s stock to “sector weight.”
HP gained 2.2% after BofA Global Research upgraded the PC maker to “buy” from “underperform” and raised its price target.
McCormick dropped 9.7% after the spice maker missed third-quarter sales estimates.
Point Biopharma Global surged 84.6% as Eli Lilly was set to buy the cancer therapy developer for $1.4 billion. The latter was down 2.3%.