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Sept. 29, 2021, 10:26 a.m. EDT · CORRECTED

S&P 500 books worst daily slump in about 4 months as bond yields climb

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By Christine Idzelis and William Watts

A previous version of Market Snapshot included an inaccurate description of Mark Grant’s title and affiliation. He is chief global strategist in fixed income at B. Riley Securities.

U.S. equity benchmarks ended sharply lower Tuesday, as Treasury yields extended their climb, putting pressure on the technology sector and growth-oriented shares.

How did stocks trade?

  • The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.28% fell 569.38 points, or 1.6%, to end at 34,299.99.

  • The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.05% slid 90.48 points, or 2%, finishing at 4,352.63, booking its worst daily percent drop since May 12, according to Dow Jones Market Data.

  • The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.67% dropped 423.29 points, or 2.8%, to close at 14,546.68.

On Monday , the Dow Jones Industrial Average rose 71 points, or 0.2%, while the S&P 500 declined 0.3% and the tech-heavy Nasdaq Composite dropped 0.5%.

What drove the market?

Stocks sold off as investors anticipate the Federal Reserve moving away from the accommodative policy it set during the early months of the pandemic on concerns over elevated inflation.

“Investor anxiety is pretty elevated right now,” said Seema Shah, chief strategist with Principal Global Investors, in a phone interview Tuesday. “There’s a lot going on.”

The CBOE Volatility Index /zigman2/quotes/210387616/delayed VX00 +1.61% was trading around 23 Tuesday afternoon, up about 40% this month, according to FactSet data, at last check.

Investors have been shunning government bonds since last week’s Federal Open Market Committee meeting, as traders brought forward expectations for the first interest-rate increase into late 2022. Markets also were giving roughly 50% odds the European Central Bank will join the Fed with a rate increase next year.

The 10-year Treasury yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -5.01% rose about 5 basis points to 1.534% Tuesday, rising for six straight trading days and touching its highest level since June .

Rising long-term bond yields have put pressure on tech- and other growth-related shares, while stocks for companies more sensitive to the economic cycle also succumbed to selling pressure, but outperformed more rate-sensitive stocks.

“Bottom line, the stock market is being driven by the bond market this week and if we see bonds continue to drop (yields spike higher) then that will result in further underperformance by growth stocks and drag the broader market lower while stabilization in yields would likely allow for a rebound,” said Tom Essaye, founder and president of Sevens Report Research, in a Tuesday note.

The speculation about rising interest rates next year has been helping the U.S. dollar gain ground, with the dollar index /zigman2/quotes/210598269/delayed DXY -0.18% just 1% below its 52-week intraday high.

Fed Chair Jerome Powell spoke Tuesday in front of the Senate Banking Committee with U.S. Treasury Secretary Janet Yellen on the government’s response to the coronavirus pandemic, and is due on Wednesday to speak at an ECB event.

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
35,657.08
-99.80 -0.28%
Volume: 183.91M
Oct. 27, 2021 1:07p
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/zigman2/quotes/210599714/realtime
US : S&P US
4,577.30
+2.51 +0.05%
Volume: 1.15B
Oct. 27, 2021 1:07p
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/zigman2/quotes/210598365/realtime
US : Nasdaq
15,338.27
+102.55 +0.67%
Volume: 3.61M
Oct. 27, 2021 1:07p
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/zigman2/quotes/210387616/delayed
US : U.S.: CBOE
$ 18.90
+0.30 +1.61%
Volume: 60,973
Oct. 26, 2021 12:00a
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/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
1.53
-0.08 -5.01%
Volume: 0.00
Oct. 27, 2021 1:07p
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/zigman2/quotes/210598269/delayed
US : U.S.: ICE Futures U.S.
93.78
-0.17 -0.18%
Volume: 0.00
Oct. 27, 2021 12:57p
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