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The Dow closed down 1.15%, the S&P 500 dropped 1.02%, and the Nasdaq Composite fell 0.68%, extending the market’s losing streak to a fifth straight day. Investors are increasingly worried about the impact of rising interest rates and inflationary pressures.
Treasury Yields Reach New Highs, Weighing on Stocks
The losses came as the yield on the benchmark 10-year Treasury note jumped to 4.82%, its highest level since 2008. Rising yields make stocks less attractive by comparison and increase borrowing costs for consumers and businesses.
“The relentless rise in Treasury yields continues to pressure equity valuations and drive rotations beneath the surface,” said Quincy Krosby, chief global strategist at LPL Financial.
Energy Sector Hit Hard
The energy sector led declines as oil prices tumbled over 3% on renewed demand concerns. Exxon Mobil stock dropped 2.7% to trigger a sell signal, closing 8% off its 52-week high. Chevron also fell 2.4%.
The Energy Select Sector SPDR ETF, a key gauge of energy stocks, tested its 200-day moving average support level before closing down 0.9%.
“Oil is getting hit on global economic slowdown fears,” said Edward Moya, senior market analyst at OANDA. “The crude demand outlook is deteriorating as the risks of a worldwide recession increase.”
Tech Selloff Resumes
After a one-day reprieve, technology stocks resumed their downward trajectory. Apple lost 1.5%, Amazon dropped 1.2% and Google-parent Alphabet fell 1.3%.
The tech-heavy Nasdaq is now down over 10% from its August peak, with semiconductor stocks facing particular pressure. Nvidia and Advanced Micro Devices fell 2.3% and 1.6%, respectively.
Rising rates disproportionately impact tech companies by increasing their borrowing costs and reducing the value of future earnings.
Consumer Stocks Drag on Market
Shares of major consumer companies helped drag down the broader market amid worries that surging inflation and higher borrowing costs could crimp spending.
Clorox plunged nearly 10% after issuing a profit warning and announcing job cuts due to rising costs and supply chain problems. PepsiCo lost 1.9% and Coca-Cola fell 1.6% as staples stocks came under pressure.
Retailers were also broadly lower, with Target down 2.7%, Walmart losing 1.5% and Costco dropping 3.1%.
September Jobs Report Looms Large
Stocks could face further volatility Friday when the Labor Department releases its September jobs report. Analysts expect the U.S. economy added 250,000 jobs last month.
A stronger-than-expected jobs number could force the Federal Reserve to keep aggressively hiking interest rates to fight inflation. The central bank has already raised rates five times this year, including three consecutive 0.75 percentage point increases.
“All eyes are on the September jobs report,” said Ryan Detrick, chief market strategist at Carson Group. “A hot number likely seals the deal for another big rate hike in November.”
- Stocks closed sharply lower amid a broad selloff led by energy, tech and consumer stocks
- The 10-year Treasury yield hit a 14-year high above 4.8%, fueling equity market losses
- Oil prices tumbled over 3% on demand worries, dragging down Exxon and Chevron
- Clorox plunged after issuing a profit warning tied to rising costs and supply snags
- September jobs data Friday could spark more volatility if hiring remains strong
With Treasury yields elevated, recession fears mounting and third-quarter earnings season on tap, markets could see increased choppiness in the weeks ahead.
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