A major sell-off rocked Wall Street on Tuesday, driven by a rise in Treasury yields that raised uncertainty about the possibility of an immediate interest rate cut by the Federal Reserve.
The S&P 500 (^GSPC) saw a drop of almost 1.1%, while the Dow Jones Industrial Average (^DJI) fell about 1.1%, equivalent to more than 350 points. The technology-oriented Nasdaq Composite (^IXIC) also suffered a drop of more than 1.5%, following a positive close on Monday.
Statements from Federal Reserve officials indicated that the strength of the U.S. economy will likely keep borrowing costs elevated for an extended period. According to CME’s FedWatch tool, traders currently assign a 29% chance that authorities will raise rates at their November meeting, compared to just 16% a week ago.
This outlook caused 10-year (^TNX) and 30-year (^TYX) Treasury yields to rise, reaching 16-year highs on Tuesday. This bond sell-off, combined with increases in oil prices and the value of the dollar, has dampened appetite for stocks. The Russell 2000 index of small-cap stocks turned negative for the year on Monday.
In other economic news, the number of job openings in the United States rose in August, raising questions about whether the labor market is cooling fast enough to satisfy the Federal Reserve. The latest Job Openings and Labor Turnover Survey (JOLTS) report, released on Tuesday, revealed that there were 9.6 million vacant positions at the end of August, up from 8.83 million in July. Economists surveyed by Bloomberg had forecast 8.82 million job openings in July.
The JOLTS report precedes the highly anticipated September U.S. employment report, scheduled for release on Friday.
Stocks fall on hawkish Fed comments
Stocks faced further downward pressure after Cleveland Federal Reserve President Loretta Mester stated on Tuesday that she would likely support a rate hike at the next meeting if current economic conditions persist.
The Dow Jones Industrial Average (^DJI) plunged more than 400 points, or 1.26%, while the S&P 500 (^GSPC) sank 1.5%. The tech-heavy Nasdaq Composite (^IXIC) saw a 1.8% drop. Mester emphasized that the Federal Reserve is likely at or near its maximum interest rate target and anticipates reaching 2% inflation by the end of 2025.
Stocks make headlines in morning trading
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Power plug (PLUG): Shares fell 5% after Truist Financial lowered its stock price target to $8 per share from $9 previously. Concerns about a prolonged rise in interest rates also contributed to the decline, hitting energy-related stocks especially hard.
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Game Stop (GME): The meme-favorite stock saw another 4.5% drop in early trading, hitting its lowest level since February 2021, following the appointment of Ryan Cohen as CEO last week.
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McCormick (MKC): Shares fell nearly 9% after the company reported a year-over-year decline in quarterly earnings. The stock is headed for its lowest close since March 2020.
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Biopharma Point (PNT): Shares rose more than 85% following news of Eli Lilly’s $1.4 billion acquisition of the company, as announced Tuesday. However, shares of Eli Lilly (LLY) fell 3.5%.
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