NEW YORK: Wall Street’s main indexes slid more than 1% on Tuesday after a hotter-than-expected jobs report deepened worries over interest rates staying higher for longer, providing a fresh leg up to Treasury yields and dragging megacap stocks lower.
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.
A Labor Department report showed US job openings unexpectedly increased in August, pointing to tight labor market conditions.
Cleveland Fed leader Loretta Mester noted the potential for another rate hike in November if the current state of the economy holds, while Atlanta President Raphael Bostic said it will likely be a long time until rate cuts arrive.
Traders’ bets on at least another 25-basis-point rate hike stood in November and December at 30% and 48%, respectively, according to CME’s FedWatch tool. Meanwhile, a rate cut was priced in as early as March.
Yields on 10-year and 30-year US government bonds hit their highest since 2007, pushing Apple, Tesla and Alphabet lower around 1% each.
Amazon.com and Microsoft dropped 3.3% and 2.4%, respectively, after Reuters reported British media regulator Ofcom will push for an antitrust investigation into the companies’ dominance of the UK cloud computing market.
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 do have potentially one more Fed rate hike coming at the tail end of this year, “ said Jason Pride, chief of investment strategy and research at Glenmede in Philadelphia, “Any strength in the jobs market can push us in that direction and strengthen CPI.” Consumer discretionary, real-estate and information technology were the worst hit among major S&P 500 sector indexes, down between 1.6% and 2.1%.
At 12:06 p.m. ET, the Dow Jones Industrial Average was down 358.67 points, or 1.07%, at 33,074.68, the S&P 500 was down 55.07 points, or 1.28%, at 4,233.32, and the Nasdaq Composite was down 214.48 points, or 1.61%, at 13,093.30.
The CBOE volatility index, known as Wall Street’s “fear gauge”, touched a more than four-month high, reflecting heightened investor anxiety.
Focus now shifts to the ADP National Employment numbers and the more comprehensive non-farms payrolls report for further clues on the state of the US labor market.
Among individual stocks, Airbnb fell 5.5% after KeyBanc downgraded the vacation lodging platform’s stock to “sector weight”.
HP gained 2.2% after BofA Global Research upgraded the PC maker to “buy” from “underperform” and raised its price target.
McCormick dropped 9.0% after the spice maker missed third-quarter sales estimates.
Boeing edged up 0.8% after Reuters reported United Airlines was set to announce an order for 50 Boeing 787 Dreamliner aircraft.
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