Wall Street Stumbles on Rising Treasury Yields, Inflation Worries

All three major U.S. stock indexes slid nearly 2% or more, with interest rate sensitive tech and tech-adjacent stocks weighing heaviest as investors lost their risk appetite.

The S&P 500 index and the Nasdaq Composite index were on track for their largest monthly declines since September 2020.

“The big picture is the sudden surge in the past week of yields, which has led to a ‘sell first, ask questions later’ mentality,” Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.

“(But) there are multiple factors weighing on sentiment today,” Detrick added. “The back-and-forth in Washington with the debt ceiling and the spending bill and potential higher taxes have weighed on overall investor psyche and has led to a pretty good sized sell-off.”

The benchmark index was also setting a course for its weakest quarterly performance since the COVID pandemic brought the global economy to its knees.

Weakness pervaded across most asset classes, including gold, suggesting widespread risk-off sentiment.

U.S. Treasury yields continued rising, to the highest level since June, as inflation expectations heated up and fears grew that the U.S. Federal Reserve could shorten its timeline for tightening its monetary policy.

Treasury Secretary Janet Yellen said she expected inflation to end 2021 near 4% and warned lawmakers their failure to avert a government shutdown as the nation moves closer to exhausting its borrowing capabilities could cause “serious harm” to the economy.

Senate Republicans appeared set to strike down Democrats’ efforts to extend the government’s borrowing authority and avoid a potential U.S. credit default.

A Conference Board report showed consumer confidence weakened unexpectedly in September to the lowest level since February.

Unofficially, the Dow Jones Industrial Average fell 565.16 points, or 1.62%, to 34,304.21, the S&P 500 lost 90.34 points, or 2.03%, to 4,352.77 and the Nasdaq Composite dropped 420.41 points, or 2.81%, to 14,549.56.

Among the 11 major sectors of the S&P 500, all but energy ended red, with tech and communications services suffering the steepest percentage losses.

Apple Inc, Microsoft Corp, Amazon.com Inc and Alphabet Inc weighed heaviest on the S&P and Nasdaq.

Ford Motor Co was one of the few bright spots, advancing on news that it would join Korean battery partner SK Innovation to invest $11.4 billion to build an electric F-150 assembly plant and three U.S. battery plants.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Stephen Culp; Additional reporting by Noel Randewich in New York and Devik Jain in Bengaluru; Editing by Richard Chang)