US Stocks Fall Sharply Tuesday 10/03 15:49
Wall Street fell sharply Tuesday as it focused on the downside of a
surprisingly strong job market.
NEW YORK (AP) -- Wall Street fell sharply Tuesday as it focused on the
downside of a surprisingly strong job market.
The S&P 500 dropped 1.4% to its lowest point in four months. The Dow Jones
Industrial Average tumbled 430 points, or 1.3% and wiped out the last of its
gains made for the year so far. Some of the heaviest losses came from Big Tech
stocks, which sent the Nasdaq composite to a market-leading loss of 1.9%.
Stocks fell as the pressure on them cranked even higher from rising Treasury
yields in the bond market. Such weight has been the main reason the S&P 500 has
lost more than 40% of its value since the end of July, after charging higher
for much of the year.
The 10-year Treasury yield climbed again Tuesday, up to 4.79% from 4.69%
late Monday and from just 0.50% early in the pandemic. It touched its highest
level since 2007 and rose after a report showed U.S. employers have many more
job openings than expected.
When bonds are paying so much more in interest, they pull investment dollars
away from stocks and other investments prone to bigger swings in price than
bonds. High yields also make borrowing more expensive for companies and
households across the economy, which can hurt corporate profits.
Yields have been on the march because investors are increasingly taking the
Federal Reserve at its word that it will keep its main interest rate high for a
long time in order to drive down inflation. The Fed has already yanked its
federal funds rate to the highest level since 2001, and it indicated last month
it may keep the rate higher in 2024 than it earlier expected.
Fed Gov. Michelle Bowman said in a speech Monday that she expects it will
likely be appropriate "to raise rates further and hold them at a restrictive
level for some time." Restrictive is what Fed officials call high-enough rates
to slow the overall economy.
Tuesday's report on the U.S. job market could give the Fed more reason to
keep rates high. It showed employers were advertising 9.6 million job openings
at the end of August, much higher than the 8.9 million that economists expected.
Such hunger for workers could keep upward pressure on wages to attract
employees. While that would be welcomed by workers trying to keep up with
inflation, the Fed's fear is that could give inflation more fuel.
"It's a classic good news is bad news because the potential impact of higher
interest rates on both the economy and markets is becoming concerning as the
yield on the 10-year Treasury note continues to march higher," said Yung-Yu Ma,
chief investment officer at BMO Wealth Management.
Big Tech stocks were some of the heaviest weights on the market. They and
other high-growth stocks are typically seen as some of the biggest victims of
high interest rates. Amazon fell 3.7%, Microsoft dropped 2.6% and Nvidia lost
Several other challenges are also tugging at Wall Street besides higher
yields. The resumption of student-loan repayments could drag on spending by
U.S. households, which has been strong enough to help keep the economy out of a
recession despite high interest rates. Higher oil prices are threatening to
worsen inflation, and economies around the world look shaky.
A weaker recovery than expected in China's economy was one of the main
reasons McCormick, a maker of cooking seasonings and spices, reported slightly
weaker revenue for its latest quarter than analysts expected. Its profit
matched expectations, but its stock fell 8.5%.
The world's second-largest economy is also facing a crisis within its
property development industry, and Hong Kong's Hang Seng index tumbled 2.7% as
investors unloaded stocks of developers.
However, China Evergrande jumped 28% after resuming trading Tuesday. Its
shares were suspended last week as the troubled real estate developer announced
that its chairman was under investigation.
Markets in mainland China and South Korea remained closed for holidays,
while Japan's Nikkei 225 index fell 1.6%. Stocks were also lower across much of
On Wall Street, Point Biopharma, which develops cancer-fighting treatments,
soared 84.9% after Eli Lilly said it was buying the company for about $1.4
billion in cash. Eli Lilly fell 2.4%.
All told, the S&P 500 fell 58.94 points to 4,229.45. The Nasdaq sank 248.31
to 13,059.47, and the Dow dropped 430.97 to 33,002.38.
The Dow is down 0.4% for the year so far, after being up nearly 8% at the
start of August. The S&P 500, which is the index more 401(k) investments are
benchmarked against, has sliced its gain for the year so far to 10.2%.
Oil prices ticked higher a day after slumping sharply to trim their big
gains since the summer.
A barrel of benchmark U.S. crude rose 41 cents to settle at $89.23 after
charging mostly higher from $70 during the summer. Brent crude, the
international standard, rose 21 cents to $90.92 per barrel.