U.S. stocks fell firmly on Tuesday after a surge in USA government bond yields to their highest level in nearly seven years challenged appetite for equities compared with climbing rates for risk-free bonds.
The Dow Jones Industrial Average fell more than 200 points, while the broader Standard & Poor's 500 fell 0.7%.
Oil prices ended a shade firmer after retreating from multi-year highs hit early in the day on Tuesday, supported by concerns that US sanctions on Iran are likely to restrict crude exports from one of the biggest producers in the Middle East. The S&P 500 closed at 2,711.45 for a loss of -18.68 points or -0.68%. The Nasdaq composite fell 60 points, or 0.8 percent, to 7,349. The Russell 2000 index of smaller-company stocks finished flat at 1,600.34. Treasuries were a key factor for the market Tuesday as investors watched 10-year Treasury yields climb to 3.08%. The 30-year fixed rate mortgage rose 0.09 percentage point on Tuesday to 4.75%, a new 52-week high, according to Mortgage News Daily. The 10-year rose above 3.08% on the back of strong economic data.
Citing stronger inflation and US economic trends, the Federal Reserve has gradually increased its benchmark short-term interest rate.
"The stock market was due for a digestion of the gains that we've seen over the last eight trading sessions", said Quincy Krosby, chief market strategist at Prudential Financial.More news: OnePlus 6: Notches Are Not For Everyone!
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The rise in bond yields pulled down shares in real estate investment trusts and other high-dividend-paying stocks.
Banks, which stand to prosper because of higher interest rates on loans, bucked the downward trend. Mortgage rates, which have been rising this year, tend to track the movement in the 10-year Treasury yield.
The core personal consumption expenditures price index, the Fed's preferred measure of inflation, rose 1.9% in March. (HD) fell 1.5% after reported lower-than-expected revenue.
Technology and health care companies took some of the worst losses. Brent crude, used to price global oil, added 20 cents to close at $78.43 a barrel in London.
The Dow lost 183 points, or 0.7 percent, to 24,715. The Nasdaq composite fell 75 points, or 1 percent, to 7,335.