US: Wall St tumbles on weak consumer sentiment and rising bond yields

[NEW YORK] Wall Street indexes sharply dropped on Tuesday as weak consumer confidence data deepened concerns over slowing US economic growth, with the Nasdaq down more than 2 per cent as a surge in Treasury yields pressured mega-cap technology stocks.

At 10:38 am ET, the Dow Jones Industrial Average was down 361.68 points or 1.04 per cent, at 34,507.69. The S&P 500 was down 64.66 points or 1.46 per cent, at 4,378.45, and the Nasdaq Composite was down 321.51 points, or 2.15 per cent at 14,648.46.

US consumer confidence unexpectedly fell to its lowest since February this month, as soaring Covid-19 infections intensified concerns about the economy's near-term prospects.

The reading, coupled with a rising trade deficit and an expected decline in vehicle sales, brewed fresh concerns about the state of consumption in the country, which is a key driver of economic growth.

Sam Stovall, chief investment strategist at CFRA Research in New York, said: "What looks like slowing down of economic growth, yet the increase in the 10-year yield - that's causing investors to say 'Maybe we should be getting out of tech'.

"Consumers continue to be worried by supply disruptions, the threat of higher inflation as well as the Delta variant, and the kind of an impact that will have on their life and the economy."

Fed Chair Jerome Powell had also flagged concerns over prolonged difficulties in a post-Covid economic reopening, and in a hearing before the US Senate Banking Committee, said that even with the eventual tapering of stimulus, monetary policy would likely remain accommodative until mid-2022.

The two-year US Treasury yield surged to 18-month highs, weighing on shares of high-growth companies whose values are closely linked to future earnings.

Shares of Apple, Microsoft Corp, Amazon.com Inc and Google-parent Alphabet Inc dropped by between 1.1 per cent and 3.5 per cent. These stocks have benefited from the low-interest rate environment since the start of the pandemic.

Progress on US government funding negotiations was also in focus after a sharply divided US Senate failed on Monday to advance a measure to suspend the federal debt ceiling and avoid a partial government shutdown ahead of a Sept 30 deadline.

REUTERS