Big technology stocks were among the biggest drags on the market. Apple fell 3.6 per cent and Nvidia dropped 3.1 per cent.
The latest pullback in stocks came as Treasury yields climbed following data showing the US services sector remains strong.
The Institute for Supply Management’s latest survey showed that the sector, which employs most Americans, grew at a faster pace than economists expected in August. The sector is among the biggest pieces of the US economy and it has remained resilient throughout 2023 despite persistent inflation and rising interest rates squeezing consumers.
“That suggests there is still a tremendous amount of demand for the services sector,” said Tom Hainlin, national investment strategist at US Bank Wealth Management.
Bond yields jumped following the report. The yield on the 10-year Treasury, which influences interest rates on mortgages and other loans, rose to 4.30 per cent from about 4.25 per cent just prior to the survey’s release.
The yield on the 2-year Treasury, which tracks expectations for the Federal Reserve, rose to 5.04 per cent from 4.96 per cent just prior to the survey’s results being released.
The dominant economic theme continues to be inflation and interest rates, which the Fed has boosted in an effort to bring down prices. Investors are hoping that the Fed might moderate interest rate increases going forward as inflation has been easing for months.
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Inflation has been easing for months under the weight of the Fed’s aggressive rate hikes that started in 2022 and brought its main interest rate to the highest level since 2001. The policy raised concerns that the central bank might be too aggressive and hit the brakes on economic growth with enough force that the economy would be thrown into a recession.
A strong jobs market and consumer spending have propped up the broader economy and staved off a recession, so far. Wall Street will get several more economic updates on inflation and retail sales later in September ahead of the Fed’s next meeting.
Beyond the recent mix of economic reports, rising oil prices and a stronger dollar may also be putting traders in a selling mood.
“The dollar has really had a strong move alongside a big move higher in oil prices, both of which in a vacuum are negative for corporate profits,” Mayfield said.
With AP
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