The Dow Jones fell more than 400 points as rising yields weighed on stocks

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Specialist Dilip Patel works at his post at the New York Stock Exchange, Tuesday, October 3, 2023. Wall Street sinks sharply as it focuses on the downside of a surprisingly strong labor market.

New York

Stocks fell sharply Tuesday afternoon as U.S. Treasury yields rose to their highest levels in more than a decade, worrying investors that rising borrowing rates could further stall the housing market.

The Dow Jones fell 430 points, or 1.3%, to its lowest closing level since June and is on track to decline for the year. The Standard & Poor’s 500 index fell 1.4% to its lowest close since May. The Nasdaq Composite lost 1.9%, extending the late-summer selloff.

The Federal Reserve indicated last month that it may raise interest rates again this year and keep interest rates high through next year. Investors are starting to worry that the housing market could be the next domino that could lead to a recession.

Although the Fed does not directly set the interest rates borrowers pay on mortgages, its actions affect them. Mortgage rates tend to track the yield on 10-year US Treasury bonds. When Treasury yields rise, mortgage rates also rise.

Stocks have rallied for most of this year, as artificial intelligence excitement has taken hold on Wall Street Energy technology stocks To stratospheric heights.

But that rally faded in August, as strong economic data raised investor concerns that a resilient economy and hot labor market would prompt the Fed to keep interest rates higher for longer to reduce inflation.

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Treasury yields rose and the US dollar rose in the weeks following the Federal Reserve’s late October meeting, continuing to pare stock market gains from the spring. Stocks tend to suffer when government bond yields rise, because that means investors can get higher returns on less risky assets.

Yields continued to rise on Tuesday, with their rise accelerating after new data from the Bureau of Labor Statistics showed that The number of job opportunities in the United States has increased unexpectedly to an estimated 9.61 million open jobs in August. This is higher than July’s upwardly revised estimate of 8.92 million jobs and higher than the consensus estimate of 8.8 million among economists.

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

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Pedestrians near the US Treasury Department building in Washington, DC, USA on Friday, December 30, 2022.

CNN Fear and Greed Index The index fell to a “severe fear” reading of 16, its lowest level since last October.

West Texas Intermediate crude futures, the US benchmark for oil, fell below $90 on Tuesday, cooling a rally in recent months as a series of production cuts announced by OPEC+ began to weigh on oil prices.

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

“Unless [jobs] “If the report comes in lower than expected, Wall Street will likely start fully pricing in at least one rate hike before the end of the year,” said Ed Moya, senior market analyst at OANDA.

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Adding to the volatility is the fallout from the narrowly avoided federal government shutdown last weekend due to the fiscal budget. House Republicans are voting on whether to oust House Speaker Kevin McCarthy Of his role because he worked with Democrats to avoid a shutdown.

“The news from the House today once again highlights the difficult political backdrop in addressing such issues,” said Michael Reinking, director of NYSE research.

Moody’s, the only major credit rating company that maintains a perfect credit rating for the United States, warned that a government shutdown would be “credit negative” for the United States. Further political turmoil is likely to lead to a downgrade.

As stocks stabilize after the trading day, levels may change slightly.

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