Wall St declines as rate worries keep Treasury yields elevated

By Ankika Biswas and Shashwat Chauhan

(Reuters) – Wall Street’s main indexes dropped on Tuesday as investors continued to grapple with the prospects of a prolonged restrictive monetary policy by the Federal Reserve and its subsequent impact on the economy.

Megacap growth stocks including Apple, Microsoft, Meta Platforms, Amazon.com and Tesla lost between 0.8% and 1.2%.

All 11 S&P 500 sectors were trading lower, with real estate, utilities and information technology the worst hit, down between 0.8% and 1.3%.

At 9:35 a.m. ET, the Dow Jones Industrial Average was down 143.25 points, or 0.42%, at 33,863.63, the S&P 500 was down 26.60 points, or 0.61%, at 4,310.84, and the Nasdaq Composite was down 90.36 points, or 0.68%, at 13,180.96.

All three major U.S. stock indexes are set to log quarterly declines for the first time this year heading into the last trading days of September.

Pressuring equities, the benchmark two- and 10-year Treasury yields have scaled multi-year highs after the Fed’s hawkish longer-term rate outlook, a stance also projected by other major central banks.

“There’s so much uncertainty in the market … interest rates at this (high) level and when will they go lower are the biggest drivers,” said Chris Giamo, head of commercial banking at TD Bank.

Traders’ bets on the benchmark rate remaining unchanged in November and December stood close to 75% and 59%, respectively, according to CME’s FedWatch tool. Meanwhile, a 25-basis-point rate cut is being priced in as early as March, growing to over 33% in June and July.

Adding to investor anxiety was the likelihood of a partial shutdown of the U.S. government by Sunday, which, according to ratings agency Moody’s, is likely to be a “credit negative”.

“A polarized political environment, uncertainty on macroeconomic conditions, and then you throw a government shutdown on top of it will create a gray area where there’s no clear path,” TD Bank’s Giamo added.

A Goldman Sachs report showed hedge funds increased their bearish bets mainly on U.S. stocks last week, with clients mostly adding short positions and getting rid of long positions. Consumer discretionary, industrials and financials were the most net sold.

Through the week, data including on durable goods, the personal consumption expenditures price index for August, second-quarter gross domestic product, as well as remarks by Fed policymakers such as Chair Jerome Powell will be monitored.

Among individual stocks, Immunovant surged 77% after the drug developer said its antibody treatment succeeded in an early-stage trial. Roivant Sciences, the company’s largest shareholder as per LSEG data, was up 15.2%.

Edwards Lifesciences rose 1.4% after Oppenheimer upgraded the medical device maker’s stock to “outperform”.

Sirius XM Holdings lost 11% following Liberty Media’s merger proposal with the radio company.

Declining issues outnumbered advancers for a 4.67-to-1 ratio on the NYSE and a 1.67-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week high and 21 new lows, while the Nasdaq recorded nine new highs and 114 new lows.

(Reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Maju Samuel)