Dow falls more than 400 points as spiking yields weigh on stocks

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Specialist Dilip Patel works at his post on the floor of the New York Stock Exchange, Tuesday, Oct. 3, 2023. Wall Street is falling sharply as it focuses on a surprisingly strong job market rebound.


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Stocks fell sharply on Tuesday afternoon as U.S. Treasury yields rose to their highest levels in a decade, leaving investors worried that higher lending rates could further dampen the housing market.

The Dow fell 430 points, or 1.3%, to its lowest close since June and returned to a year-to-date low. The benchmark S&P 500 fell 1.4% to its lowest close since May. The Nasdaq Composite lost 1.9%, extending a late-summer selloff.

The central bank signaled last month that it could introduce one more hike this year and hold rates until next year. Investors are beginning to worry that the housing market could be the next domino to fall and trigger a recession.

Although the central bank does not directly set the interest rates borrowers pay on mortgages, its actions affect them. Mortgage rates track the yield on 10-year US Treasuries. As Treasury yields rise, so do mortgage rates.

Stocks rallied for most of the year as AI excitement caught on to Wall Street. Running tech stocks For stratospheric heights.

But that rally petered out in August as investors worried that strong economic data suggested a resilient economy and a warm labor market would lead the Federal Reserve to keep interest rates higher to curb inflation.

Treasury yields have risen and the U.S. dollar has risen in the weeks since the Fed’s late-October meeting, continuing to chip away at stock market gains since the spring. Stocks suffer when government bond yields are raised, as investors can seek higher returns in lower-risk assets.

Yields continued to rise on Tuesday, accelerating after new data from the Bureau of Labor Statistics. The number of US job openings rose unexpectedly An estimated 9.61 million jobs were created in August. That was up from July’s upwardly revised estimate of 8.92 million openings and above the 8.8 million consensus estimate among economists.

The yield on the 10-year Treasury note hit 4.802% on Tuesday, its highest level since August 2007. The 30-year was at 4.936%, its highest level since September 2007.

Ding Shen/Bloomberg/Getty Images

Dec. Pedestrians near the US Treasury Building in Washington, DC on Friday, 30, 2022.

CNN Symbol of fear and greed “Extreme fear” fell to 16, the lowest level since last October.

West Texas Intermediate crude futures, the U.S. benchmark for oil, fell below $90 on Tuesday as a series of production cuts announced by OPEC+ began to catch up with oil prices, cooling from their gains in recent months.

Later this week, the Bureau of Labor Statistics will also release employment figures for August.

“Besides [jobs] The report comes less than expected and Wall Street will begin to fully price in at least one more Fed rate hike before the end of the year,” said Ed Moya, senior market analyst at OANDA.

Adding to the volatility was the fallout from last weekend’s Fiscal Budget, which narrowly avoided a shutdown of the central government. House Republicans vote to impeach Speaker Kevin McCarthy From his role as he worked with Democrats to avoid a shutdown.

“The news coming out of the House today highlights once again the difficult political backdrop for addressing such issues,” said Michael Reinking, manager of NYSE research.

Moody’s, the only major credit rating agency with a valid credit rating in the US, has warned that a government shutdown would be “credit negative” for the US. And political turmoil could trigger a downgrade.

As stocks settle later in the trading day, levels may change slightly.

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