Wall Street Drops as Treasury Yields Rise, Megacaps Decline

Wall Street’s major indexes experienced a decline on Tuesday as Treasury yields continued their multi-year-high rally, causing concerns about higher interest rates. The surge in yields, driven by hotter-than-expected jobs data, led to a drop in megacap stocks including Apple, Tesla, Amazon.com, Alphabet, and Microsoft, ranging from 0.8% to 2.5%.

Investors, who had witnessed a strong performance in megacap stocks during the first half of the year due to the Artificial Intelligence (AI) hype, now fear a loss of momentum as yields continue to rise. David Russell, global head of market strategy at TradeStation, noted that the current move in the 10-year Treasury yield is historic and that the market is catching up after a period of inversion.

The consumer discretionary sector led the declines in the S&P 500, falling 2.2%, while utilities, which are often considered as a bond proxy, dropped 1.8%. Industrials slipped 0.2%, but Boeing shares limited the sector’s decline with a 1.8% increase following news of an order for 50 Boeing 787 Dreamliner aircraft by United Airlines.

The Labor Department’s report for August showed 9.61 million job openings, surpassing economists’ estimates of 8.8 million. Investors will now focus on the ADP National Employment numbers and the non-farms payrolls report for further insights into the U.S. labor market.

Atlanta Fed President Raphael Bostic echoed the sentiments of several Fed officials, stating that there is no urgency for the Fed to raise its policy interest rate again, given the slowing economy and falling inflation. However, he also mentioned that it may be a while before the Fed considers cutting rates.

As of mid-morning, the Dow Jones Industrial Average was down 0.68%, the S&P 500 was down 0.84%, and the Nasdaq Composite was down 1.01%. The previous day, the S&P 500 ended flat due to uncertainty over the interest rate trajectory.

In individual stock news, Airbnb fell 4.1% after being downgraded by Keybanc, while HP gained 2.2% following an upgrade by BofA Global Research. McCormick dropped 9.7% after missing third-quarter sales estimates, and Point Biopharma Global surged 84.6% as Eli Lilly and Co announced its acquisition of the cancer therapy developer for $1.4 billion.

Overall, the market experienced a negative sentiment, with declining issues outnumbering advancers. The S&P index recorded new highs and lows, while the Nasdaq recorded new highs and lows as well.

(Source: Reuters)