US STOCKS-Wall St slides over 1% as Treasury yields hover at 16-year peaks

BY Reuters | ECONOMIC | 09/26/23 02:17 PM EDT

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All 11 S&P 500 sectors sink, utilities drop most


Moody's warns government shutdown bad for U.S. credit


U.S. sues (AMZN) for breaking antitrust law


Indexes down: Dow 1.19%, S&P 500 1.4%, Nasdaq 1.48%

(Updates with mid-afternoon trading)

By Lewis Krauskopf, Ankika Biswas and Shashwat Chauhan

Sept 26 (Reuters) - Wall Street's main indexes sank over 1% on Tuesday as 10-year Treasury yields held their multi-year highs, with investors still wrestling with prospects for a long period of high interest rates and the economic fallout.

Adding to investor anxiety was the potential of a partial U.S. government shutdown by the weekend, which ratings agency Moody's warned would harm the country's credit.

Benchmark 10-year Treasury yields have climbed to 16-year highs in the wake of the Federal Reserve's hawkish longer-term rate outlook last week.

Yields may trend higher until Friday's personal consumption expenditures price index gives a fresh view of the inflation picture, said Jack Janasiewicz, portfolio manager at Natixis.

"The market is still trying to digest the potential for where that 10-year rate is going to finish," Janasiewicz said. "Until we get more clarity on where the 10-year settles, then the equity market is going to be pretty nervous."

The Dow Jones Industrial Average fell 403.54 points, or 1.19%, to 33,603.34, the S&P 500 lost 60.68 points, or 1.40%, to 4,276.76 and the Nasdaq Composite dropped 197.01 points, or 1.48%, to 13,074.31.

All 11 S&P 500 sectors were lower. Rate-sensitive utilities and real estate sank 2.2% and 1.7%, respectively, while the heavyweight tech sector dropped 1.8%.

Energy held up best among the sectors, down 0.5%, with crude prices above the $90-per-barrel mark. However, rising energy prices represent a renewed threat to inflation, which has generally been moving down toward the Fed's 2% target.

The S&P 500 has slumped nearly 7% since late July but remains up over 11% for 2023.

Megacap stocks that have propelled indexes higher this year were mainly dragging on Tuesday. Apple (AAPL) and Microsoft (MSFT) both fell about 2%. (AMZN) shares dropped 3.4% as the U.S. Federal Trade Commission filed a long awaited antitrust lawsuit against the online retailer.

Investors later in the week also will have their eyes on other data including on durable goods and second-quarter gross domestic product, as well as remarks by Fed policymakers such as Chair Jerome Powell.

In company news, Immunovant (IMVT) shares doubled after early-stage data from the company's experimental antibody treatment exceeded analysts' expectations.

Declining issues outnumbered advancers by a 4.8-to-1 ratio on the NYSE. There were 33 new highs and 300 new lows on the NYSE.

On the Nasdaq, declining issues outnumbered advancers by a 1.8-to-1 ratio. The Nasdaq recorded 27 new highs and 308 new lows. (Reporting by Lewis Krauskopf in New York, Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Maju Samuel and Richard Chang)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.