US: Interest rate angst drags down stocks

[NEW YORK] Wall Street stocks endured an ugly session on Tuesday, tumbling in their first session back after a holiday weekend on mounting worries about higher lending rates.

The yield on the 10-year US Treasury note, a proxy for the outlook on interest rates, shot above 1.85 per cent as market watchers speculate the Federal Reserve could lift rates in March by twice as much as previously thought.

"The Fed's back is against the wall and the market is worried," said Adam Sarhan of 50 Park Investment.

"The Fed has to raise rates, but they have to keep inflation low, and what are they going to do if inflation stays high? That's the equation that is been priced on the market and it has taken the market and the Fed off guard."

The Dow Jones Industrial Average finished down 1.5 per cent at 35,368.47.

The broad-based S&P 500 shed 1.8 per cent to 4,577.13, while the tech-rich Nasdaq Composite Index sank 2.6 per cent to 14,506.90.

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Tuesday's losses also come as the market grapples with lofty Covid-19 infections in the United States and elsewhere, as well as a stream of mostly lackluster earnings from large banks.

Goldman Sachs became the latest financial giant to be punished by investors, sinking 7.0 per cent despite reporting record annual profits as fourth-quarter earnings were dented by higher costs on employee salaries amid a tight labor market.

Activision Blizzard surged 25.9 per cent after Microsoft announced a US$69 billion deal to purchase the US gaming giant. Microsoft fell 2.4 per cent.

AFP