Topline
Stocks staggered Tuesday to their weakest levels in months thanks to investor worries about the lingering impact of higher interest rates on equities.
Traders were seeing red Tuesday.
Key Facts
The Dow Jones Industrial Average, S&P 500 and tech-heavy Nasdaq each slid more than 1%, spurred by softer-than-expected monthly new home sales and consumer confidence data.
Tuesday’s dive sent the three major stock indexes to their lowest respective levels since June, and the S&P and Nasdaq are both on pace to register their worst month of 2023 in September.
The Dow’s 388-point, or 1.1%, dive is its steepest since March 22.
The rate-related downswing may seem to come at a bit of a perplexing time considering the Federal Reserve paused its hiking campaign just last week, but it comes as the market prices in the increased indications from the Fed and other central banks that rates will remain higher than previously anticipated over the next few years.
Instead of being “buoyed at the prospect of no further hikes, investors are apprehensive, even a little fearful,” Oanda analyst Craig Erlam explained Tuesday.
Driving the stock losses was a slide in colossal technology stocks, with Apple, Microsoft, Alphabet and Amazon each down about 2%, while Apple hit its lowest share price since May 25.
Surprising Fact
Numerous stocks set new 52-week lows during Tuesday’s plunge, including Chinese online retailer JD.com, real estate firm W.P. Carey and American retailer Nordstrom, according to FactSet data.
Crucial Quote
Continued consumer resilience “promotes sticky inflation and a need for sustained restrictive policy stances that, in turn, compress profit margins, erode balance sheet health, and bring an end to the expansion,” JPMorgan strategists led by Marko Kolanovic wrote in a Monday note to clients, explaining why higher rates are bad for stocks.
Key Background
The bond market is also reeling from Fed concerns: Yields on 10-year U.S. Treasury notes hit their highest level since 2007 on Monday, standing pat at 4.54% on Tuesday. The Fed’s policy-determining panel decided to hold interest rates at 5.25% to 5.5% at its meeting last week but significantly upped its outlook for the federal funds rate in 2024 and 2025. That in turn raised concerns about Americans’ ability to successfully navigate the current macroeconomic environment with significant rate cuts in the near-term a bad omen for investors looking for more growth-friendly policy.
Further Reading
Source: https://www.forbes.com/sites/dereksaul/2023/09/26/dow-sinks-400-points-stocks-worst-day-since-march-as-interest-rate-fears-roil-markets/