Stock market today: interest rates move, debt worries rock stocks
The stock market collapsed on Tuesday amid another surge in Treasury yields and signs of trouble in Washington.
On the latter front, Senate Republicans on Monday night blocked a bill that would raise the debt ceiling and prevent a government shutdown; Treasury Secretary Janet Yellen has warned that the US Treasury will be strapped for cash by October 18.
Today, meanwhile, 10-year Treasury yields continued to climb, reaching an intraday high of 1.567% – a level it last reached in June – after eclipsing 1.5 % yesterday.
This sent stock investors to the exits: Dow Jones Industrial Average decreased 1.6% to 34,299, the S&P 500 fell 2.0% to 4,352, and the Nasdaq Composite fell 2.8% to 14,546.
“Anytime we see the 10-year UST yield move so dramatically in a short period of time, especially from low starting levels, it usually coincides with a market sell-off of some magnitude,” says Brian Price. , Head of Investment Management for Commonwealth Financial Network.
Rate-sensitive mega-cap tech and communications stocks were the most affected, with Microsoft (MSFT, -3.6%), Facebook (FB, -3.7%) and parent company Google Alphabet (GOOGL, -3.7%) among the big losers of the day; energy (+ 0.3%) is the only sector that ends in the green.
“It’s no surprise that value and cyclical stocks are outperforming their growth counterparts given the rising yields,” adds Price.
Other stock market news today:
- Small cap Russel 2000 was reduced from 2.3% to 2,229.
- Hunter (HUN) withstood Wall Street’s downtrend after hedge fund Starboard Value unveiled an estimated $ 500 million, or 8.4%, stake in the chemical company, according to the the Wall Street newspaper. The activist investor is seeking to push for changes at HUN to raise the share price, people familiar with the matter said, although no details were given. The title closed up 6.3% today to bring its annual gain to more than 18%.
- Ford engine (F) was another of a handful to finish in positive territory, gaining 1.1%. This came after the automaker on Monday unveiled an $ 11.4 billion plan to build new facilities in Tennessee and Kentucky to produce electric vehicles (EVs) and the batteries to power them. The initiative will be a joint venture between Ford and South Korean battery cell supplier SK Innovation. CFRA analyst Garrett Nelson reiterated his buy rating on F stock after the announcement, saying it “helps reassure investors at a time when many are close to knowing the length and length of time. ‘impact of semiconductor shortages, which have had a disproportionate impact on Ford compared to other automakers. In addition, he views Ford’s EV strategy as the “most prudent and balanced” among the major original equipment manufacturers.
- U.S. Crude Oil Futures fell 0.2% to $ 72.59 a barrel, ending a five-day winning streak.
- Gold Futures lost 0.8% to close at $ 1,737.50 an ounce.
- The CBOE Volatility Index (VIX) fell from 23.9% to 23.25.
- Bitcoin prices were not immune to Tuesday’s nervousness. The cryptocurrency was down 3.3% to $ 41,607.45. (Bitcoin trades 24 hours a day; the prices listed here are at 4 p.m. each trading day.)
About this debt ceiling
The US debt ceiling situation needs to be watched closely until it is resolved. Chris Zaccarelli, Director of Investments for Independent Advisor Alliance, details the risks:
“The political argument this week is about the debt ceiling – a law that limits the amount the Treasury Department can raise to pay for expenses that Congress has already approved. Cause the United States to default on its debt,” which could create massive disruption in financial markets around the world. ”
Many strategists see Congress escaping this fate at the 11th hour as it has done several times in the past – Zaccarelli, for example, believes Congress will “very likely” increase the debt ceiling before the end of the year. the week.
Nonetheless, volatility and the downside could very well persist as long as the uncertainty of the debt ceiling is in play.
As always: don’t panic, just be prepared.
In this case, evaluate some of the safety valves you have. We must first think of traditional defensive sectors such as consumer staples and utilities. And, of course, you have obligations. Even “safe” fixed income securities could be affected in the event of default, but at the end of the day, shorter-term bonds offer great protection against a plethora of risks. Here, we take a look at seven of those bond funds that can add a bit of ballast: