Selling on Wall Street continued on Tue, but the pace moderated from Mon’s frenetic pace. The S&P 500 Index fell further into bear market territory. However, the tech-heavy Nasdaq Composite and high yield bonds managed to finish in the black.
The Dow Jones Industrial Average lost 151.91 pts, or 0.5% to close at 30,364.83. The broader S&P 500 index fell 0.38%. The Nasdaq Composite advanced 0.18%. The small cap Russell 2000 dropped 0.39%.
Megacap tech stocks were mixed on Tue. Gainers included Apple (AAPL US, +0.67%), Microsoft (MSFT US, +0.92%), Alphabet (GOOGL US, +0.30%), Nvidia (NVDA US, +1.21%), while Amazon (AMZN US, -1.31%) and Meta Platforms (META US, -0.32%) were the losers.
The iShares iBoxx High Yield Corporate Bond ETF (HYG US) rose 0.66%.
Later today, policymakers at the US Federal Reserve finish the second day of their two-day meeting. Voices on Wall Street and academia generally believe that the Fed should raise rates 75 basis bps.
The 10-year US Treasury note notched up 11.35 basis points (bps) to 3.4733%, while the yield on the 2-year Treasuries rose 7.25 bps to 3.4267%, its highest level since 2007.
Real yields, which account for expected inflation, have never jumped “this fast and furious”, according to Bloomberg. Ten-year real rates, inferred from Treasury inflation-protected securities (TIPS) have jumped to 0.83%, compared with a record low of minus 1.25% just seven months ago.
Higher yields are encouraging flows into the US dollar. The ICE dollar index (DXY), which measures the strength of the greenback against a basket of currencies, rose 0.42% to 105.518.
The British pound dropped by more than a cent against the dollar on Tue to trade below US$1.20 for the first time since Mar 2020. Scottish First Minister Nicola Sturgeon plans to stage a fresh Scottish independence vote late next year without authority from Boris Johnson’s government.
The front-month Brent and WTI futures closed down $1.10 at US$121.17/bbl and $2.00 at US$118.93/bbl respectively.
The most actively traded US gold futures (Aug) contracts settled down $18.30, or 1.0%, at US$1,813.50/oz. July silver, which is the most actively traded silver futures, fell 30.1 cents, or 1.4%, to end at US$20.954/oz.
European equity markets finished lower on Tue. The UK FTSE lost 0.25%, France's CAC 40 fell 1.2%, while the German DAX retreated 0.91%.