US stocks slide as benchmark Treasury yields rise

New York — Major US stock indices ended sharply lower on Tuesday as economic data underscored the view the Federal Reserve may need to keep interest rates high.

Investors also continue to closely watch benchmark Treasury yields, which hit 16-year highs on Tuesday.

Data showed US job openings unexpectedly increased in August, fuelling worries about a tight labour market ahead of Friday’s key US monthly jobs report.

“The scenario that most investors were assuming is the Fed would need to ultimately cut short-term rates, and we would return to a favourable interest rate environment,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

“But investors are seeing a different scenario now — higher rates for longer.”

Higher borrowing costs are a negative for businesses and consumers.

All but one S&P 500 sector — utilities — were lower on the day, led by declines in consumer discretionary and technology. Growth companies tend to be among the hardest hit by rising yields.

According to preliminary data, the S&P 500 lost 58.78 points, or 1.36%, to end at 4,230.24 points, while the Nasdaq Composite lost 248.31 points, or 1.87%, to 13,059.47. The Dow Jones industrial average fell 425.93 points, or 1.27%, to 33,007.42.

Atlanta Fed president Raphael Bostic said there is no urgency for the central bank to raise its policy rate again, but it will likely be “a long time” before rate cuts are appropriate. Cleveland Fed President Loretta Mester said she is open to raising rates again, potentially at the bank’s next meeting.

Shares of Amazon.com and Microsoft dropped after Reuters reported British media regulator Ofcom will push for an antitrust investigation into the companies’ dominance of the UK cloud computing market.

Investors are getting ready for US companies in the coming weeks to begin reporting on the last quarter, with some hoping the results could provide some positive news again for the market.

While the Dow is down slightly for the year so far, the Nasdaq remains up sharply since December 31 after a rally driven by enthusiasm over artificial intelligence.

Reuters