- Markets Insider
- US stocks tumbled Tuesday after the closely watched 10-year Treasury yield climbed above the 3% level for the first time since 2014.
- Selling was also pronounced in the tech sector after Google’s quarterly earnings report disappointed investors.
- Follow the Dow Jones industrial average.
The Dow Jones industrial average slid more than 2.5%, or 620 points, while the benchmark S&P 500 dropped as much as 2%. The comparatively tech-heavy Nasdaq 100 saw deeper weakness, falling more than 2.8% at its intraday low.
Perhaps the biggest overhang on investor sentiment on Tuesday was the 10-year’s breach of 3%, which market experts had pinpointed as a worrisome threshold. The fear is that higher yields will dampen spending as consumers and companies allocate more to repaying debt. The 10-year is a benchmark for mortgage rates.
Stock investors in particular are keenly aware of where the 10-year is trading, as it helps inform the Federal Reserve‘s monetary-tightening schedule. Any sign the central bank will raise interest rates faster than expected is viewed as negative for equities since hikes will theoretically lessen the appeal of stocks.
Sure enough, the S&P 500 started falling from its daily highs just one minute after the 10-year broke 3%.
At the same time, weakness in many of the large tech stocks that have led the nine-year bull market also weighed on major gauges. At the center of the selling was Google’s parent company, Alphabet, whose better-than-expected quarterly sales were overshadowed by rising expenses and a looming regulatory clampdown.
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Elsewhere in global equity markets, the Shanghai Composite climbed 2%, while the Stoxx Europe 600 was little changed. In the bond market, the 10-year US Treasury yield rose four basis points to 2.95%, just below the 3% level it breached earlier in the day.
Here’s a rundown of other asset classes: