US STOCKS-Wall St pounded as investors grapple with higher rates

BY Reuters | ECONOMIC | 09/26/23 04:00 PM EDT

(For a Reuters live blog on U.S., UK and European stock markets, click or type LIVE/ in a news window.)


All 11 S&P 500 sectors sink


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

* (AMZN) shares drop as U.S. files antitrust lawsuit

(Updates at 4 p.m. ET)

By Lewis Krauskopf, Ankika Biswas and Shashwat Chauhan

Sept 26 (Reuters) - Wall Street's main indexes ended sharply lower 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.

"We continue to adjust to the higher interest rates," said Brad McMillan, chief investment officer for Commonwealth Financial Network.

"What you are getting is increasingly a sense that the market is overvalued. ... There's a real sense out there that this isn't sustainable, and buyers are being scared away."

According to preliminary data, the S&P 500 lost 63.77 points, or 1.47%, to end at 4,273.67 points, while the Nasdaq Composite lost 206.02 points, or 1.55%, to 13,065.30. The Dow Jones Industrial Average fell 388.75 points, or 1.14%, to 33,618.13.A

All 11 S&P 500 sectors ended lower. The heavyweight tech sector dropped sharply as did the rate-sensitive utilities and real estate groups.

Megacap stocks that have propelled indexes higher this year mainly dragged on Tuesday. (AMZN) shares dropped as the U.S. Federal Trade Commission filed a long awaited antitrust lawsuit against the online retailer.

Investors are focused on Friday's personal consumption expenditures price index for a fresh view of the inflation picture. This week also brings 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 surged after early-stage data from the drug developer's experimental antibody treatment exceeded analysts' expectations. (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.

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