Major stock indexes ended sharply lower on Tuesday as economic data underscored the view the Federal Reserve may need to keep interest rates high.
Both the S&P 500 and the Dow hit their lowest levels in over four months intraday, with the latter turning negative on a year-to-date basis for the first time since early June.
The Dow Jones Industrial Average, which had plunged more than 500 points, closed down 430.97 points, or 1.3%, to 32,002.38. The Nasdaq slipped1.9% and the S&P 500 was down 1.4%.
Data showed US job openings unexpectedly increased in August, fueling worries about a tight labor market ahead of Friday’s key monthly jobs report.
Investors continue to closely watch benchmark Treasury yields, which hit 16-year highs on Tuesday.
“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.
Hotter-than-expected jobs data fanned fears of interest rates remaining higher for longer. REUTERS“But investors are seeing a different scenario now – higher rates for longer.”
Higher borrowing costs are a negative for businesses and consumers.
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.
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.
Atlanta Fed President Raphael Bostic said 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. REUTERSAmong individual stocks, Airbnb fell 6.5% after Keybanc downgraded the vacation lodging platform’s stock to “sector weight.”
HP gained 1.8% after BofA Global Research upgraded the PC maker to “buy” from “underperform” and raised its price target.
McCormick dropped 8.5% after the spice maker missed third-quarter sales estimates.
Point Biopharma Global surged 85% as Eli Lilly was set to buy the cancer therapy developer for $1.4 billion. The latter was down 2.4%.
