The Dow careened to its worst day since March – and into the red for 2023 — as an unexpected surge in job openings and the historic dysfunction in Washington rattled investors.
All three major indexes plunged more than 1% Tuesday after Labor Department data showed available positions increased in August – to 9.61 million from 8.9 million in July –fueling worries the Federal Reserve may need to keep interest rates high to tamp down the resilient job market.
The benchmark Treasury yields hit 16-year highs as investors bet that the economy’s strength will mean higher borrowing costs are here for a while.
The 10-year Treasury yield spiked to 4.8% and the 30-year hit 4.925% – both the highest since 2007.
The average rate on a 30-year fixed mortgage neared 8%.
The rising yields are also giving investors another way to earn returns, which has been denting the appetite for risky assets like stocks.
“The scenario that most investors were assuming is the Fed would need to ultimately cut short-term rates, and we would return to a favorable interest rate environment,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, NJ.
“But investors are seeing a different scenario now — higher rates for longer.”
The Dow plummeted 430.97 points, or 1.3%, to 33,002.38, while the Nasdaq dropped 248.31 points, or 1.9%, to 13,059.47 – the lowest level for both since May 31.
The S&P 500 lost 58.94 points, or 1.4%, at 4,229.45 – its lowest level since June 1.
The Dow, which was above 35,600 last month, is now down 0.4% for the year.
The broader S&P 500 is still up 10% for 2023 and the Nasdaq remains up about 25% since Dec. 31 after a rally driven by enthusiasm over artificial intelligence.
Nonetheless, the CBOE volatility index, Wall Street’s “fear gauge,” hit its highest close since May 24.
That fear gauge could spike even higher after a rebel group of House Republicans followed through on their push to vote out Speaker Kevin McCarthy after the markets closed.
Florida Rep. Matt Gaetz sparked the revolt over McCarthy’s decision to call up a stopgap spending bill to avoid a partial government shutdown — and rely on Democratic votes to get the measure through.
The move throws the House into uncharted territory, as no speaker has ever been removed from office, and effectively puts the GOP at the mercy of a dozen or so dissidents.
Tom Essay, founder of Sevens Report Research, warned that the “more dysfunctional” Congress appears, “the higher yields go and the more stocks drop.”
“So, while congressional dysfunction isn’t the main reason yields are volatile, it is a contributor and the sooner Washington removes itself from the market dialogue, the better,” he said in a Tuesday morning note.
With Post wires