Red Day
As Treasury rates traded higher and legislators resumed their budget talks, U.S. equities dropped significantly on Tuesday, with tech names pulling down the wider markets.
The Nasdaq Composite fell 2.83% to its lowest level since March, while the S&P 500 fell 2.04%. The Dow Jones Industrial Average closed down 1.63%.
The 10-year Treasury yield rose to 1.567% on Tuesday, as investors bet that the Federal Reserve will stick to its commitment to reduce its bond-buying stimulus as inflation rises. After the Fed hinted last week that it will cut its $120 billion in monthly bond purchases “soon,” the 10-year yield reversed to its highest levels since June.
Tech stocks have fallen as interest rates have risen, and as a result, popular stocks seem overpriced. Higher interest rates also make it more difficult for businesses to fund their expansion and stock buybacks. Facebook, Microsoft, and Alphabet all fell more than 3%. Nvidia, one of the largest semiconductor companies, fell 4.5%.
A budget showdown in Washington was also weighing on the markets. On Monday, the Senate GOP blocked a House-passed package that would have financed the government through December and extended the debt ceiling suspension until December 2022.
To prevent a government shutdown, Congress must approve financing by Friday, and Treasury Secretary Janet Yellen reminded Congress in a letter on Tuesday that the debt ceiling must be raised by Oct. 18 to avert a federal default.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
