Financial Markets 09/26 15:46
NEW YORK (AP) -- Wall Street's ugly September got even worse Tuesday, as a
sharp drop for stocks brought them back to where they were in June.
The S&P 500 tumbled 1.5% for its fifth loss in the last six days. The Dow
Jones Industrial Average dropped 388 points, or 1.1%, and the Nasdaq composite
September has brought a loss of 5.2% so far for the S&P 500, putting it on
track to be the worst month of the year by far, as the realization sets in that
the Federal Reserve will indeed keep interest rates high for a long time. That
growing understanding has sent yields in the bond market to their highest
levels in more than a decade, which in turn has undercut prices for stocks and
Treasury yields rose again Thursday following a mixed batch of reports on
The yield on the 10-year Treasury edged up to 4.55% from 4.54% late Monday
and is near its highest level since 2007. It's up sharply from about 3.50% in
May and from 0.50% about three years ago.
The rise in yields means bonds "now seem reasonable after a long time, but
stocks still do not," according to strategists at Barclays led by Ajay
One economic report on Tuesday showed confidence among consumers was weaker
than economists expected. That's concerning because strong spending by U.S.
households has been a bulwark keeping the economy out of a long-predicted
A separate report said sales of new homes across the country slowed by more
last month than economists expected, while a third report suggested
manufacturing in Maryland, the Virginias and the Carolinas may be steadying
itself following a more than yearlong slump.
While housing and manufacturing have felt the sting of high interest rates,
the economy overall has held up well enough to raise worries that upward
pressure still exists on inflation. That pushed the Fed last week to say it
will likely cut interest rates by less next year than earlier expected. The
Fed's main interest rate is at its highest level since 2001 in its drive to get
inflation back down to its target.
Besides high interest rates, a long list of other worries is also tugging at
Wall Street. The most immediate is the threat of another U.S. government
shutdown as Capitol Hill threatens a stalemate that could shut off federal
services across the country.
Wall Street has dealt with such shutdowns in the past, and stocks have
historically been turbulent in the runup to them, according to Lori Calvasina,
strategist at RBC Capital Markets.
After looking at the seven shutdowns that lasted 10 days or more since the
1970s, she found the S&P 500 dropped an average of roughly 10% in the three
months heading into them. But stocks managed to hold up rather well during the
shutdowns, falling an average of just 0.3%, before rebounding meaningfully
Besides the threat of higher interest rates for longer, Wall Street is also
contending with higher oil prices, shaky economies around the world, a strike
by U.S. auto workers that could put more upward pressure on inflation and a
resumption of U.S. student-loan repayments that could dent spending by
On Wall Street, the vast majority of stocks fell Tuesday under such
pressures, including 90% of those within the S&P 500.
Big Tech stocks tend to be among the hardest hit by high rates, and they
were the heaviest weights on the index. Apple fell 2.3% and Microsoft lost 1.7%.
Amazon tumbled 4% after the Federal Trade Commission and 17 state attorneys
general filed an antitrust lawsuit against it. They accuse the e-commerce
behemoth of using its dominant position to inflate prices on other platforms,
overcharge sellers and stifle competition.
Cintas dropped 5.3% for the largest loss in the S&P 500. The provider of
employee uniforms, mops, fire extinguishers and other services reported
stronger profit for its latest quarter than analysts expected. It also raised
its forecast for profit for the full fiscal year, but still within a range that
many analysts earlier expected.
Stocks fell in markets around the world, with indexes lower across Asia and
much of Europe.
Japan's Nikkei 225 fell 1.1%, South Korea's Kospi dropped 1.3% and Hong
Kong's Hang Seng lost 1.5%.
In China, concerns continued over heavily indebted real estate developer
Evergrande. The property market crisis there is dragging on China's economic
growth and raising worries about financial instability.
France's CAC 40 fell 0.7%, and Germany's DAX lost 1%.
Crude oil prices rose, adding to worries about inflation. A barrel of
benchmark U.S. crude climbed 71 cents to $90.39. Brent crude, the international
standard, added 67 cents to $93.96 per barrel.
AP Business Writers Yuri Kageyama and Matt Ott contributed.