U.S. stocks fell on Wednesday as a two-day rally in growth stocks was cut short by rising Treasury yields after data showed despite rising interest rates, the demand in labor market remained firm and the services industry slowed modestly.
After posting a loss in the previous quarter, the benchmark S&P 500 index has gained 4% so far this week as yields fell for two straight sessions on softer U.S. economic data, UK’s tax turnaround and Australia’s smaller-than-expected rate hike.
But the yields on the 10-year Treasury note rose again sharply as traders reassessed their positions based on how aggressively they expect the Federal Reserve will raise rates.
Adding to the boost, ADP data showed U.S. private employers stepped up hiring in September, indicating more room for the Federal Reserve to remain aggressive in its rate hike stance.
“It’s a little bit more jobs being created or opened than the market was expecting and that leads to the belief that the Fed is not going to be pivoting in November,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
The Institute for Supply Management’s services industry employment gauge also shot up suggesting demand for labor remains strong, while the overall industry slowed modestly in September.
The private payrolls and ISM reports come ahead of a more comprehensive and closely watched employment report from the Labor Department for September on Friday.
Rate-sensitive technology and related stocks like Nvidia Corp, Amazon.com, Apple Inc and Alphabet Inc fell between 1.8% and 4%.
“The market has yet to complete a capitulation,” said Peter Cardillo, chief market economist at Spartan Capital Securities LLC
“The past couple of days was just basically a rally in the bear market and the market needs desperately to capitulate before we can see stabilization.”
At 10:32 a.m. ET, the Dow Jones Industrial Average was down 407.54 points, or 1.34%, at 29,908.78, the S&P 500 was down 65.84 points, or 1.74%, at 3,725.09, and the Nasdaq Composite was down 258.08 points, or 2.31%, at 10,918.32.
Banks such as Citigroup and JPMorgan Chase & Co slipped more than 2% each.
Ten of the 11 major S&P 500 sectors declined in early trading with utilities and real estate stocks leading losses.
Energy was the sole gainer, up 0.3% after OPEC+ agreed its deepest cuts to oil production since the 2020 COVID pandemic.
Tesla Inc, the electric car maker headed by Musk, slid 5%.
Declining issues outnumbered advancers for a 7.56-to-1 ratio on the NYSE and a 4.14-to-1 ratio on the Nasdaq.
The S&P index recorded one new 52-week high and nine new lows, while the Nasdaq recorded 26 new highs and 63 new lows.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)