U.S. Stocks Tumble To Four-Month Lows Amid Ongoing Interest Rate Concerns

With traders continuing to express concerns about the outlook for interest rates, stocks moved sharply lower over the course of the trading day on Tuesday. The major averages all showed substantial moves to the downside after ending Monday’s trading mixed.

The major averages climbed off their worst levels going into the close but still posted steep losses. The Dow slumped 430.97 points or 1.3 percent to 33,002.38, the Nasdaq plunged 248.31 points or 1.9 percent to 13,059.47 and the S&P 500 tumbled 58.94 points or 1.4 percent to 4,229.45.

With the significant decreases on the day, the major averages all ended the session at their lowest closing levels in four months.

The sell-off on Wall Street came following the release of a report from the Labor Department unexpectedly showing a notable increase in U.S. job openings in the month of August.

The Labor Department said job openings surged to 9.61 million in August from an upwardly revised 8.92 million in July.

The jump surprised economists, who had expected job openings to edge down to 8.80 million from the 8.83 million originally reported for the previous month.

The data added to interest rate concerns amid worries strength in the labor market could convince the Federal Reserve to raise rates higher than had been anticipated and keep rates an elevated level for longer than expected.

“While the value of the JOLTS data has been called into question, the Fed continues to monitor it as a gauge the of labor market conditions and on the surface, it’s telling us that labor market conditions remain tight,” said Nancy Vanden Houten, U.S. Lead Economist at Oxford Economics.

She added, “The Fed won’t make policy decisions based on one JOLTS report, but it does keep the risks tilted toward another rate hike.”

CME Group’s FedWatch Tool is currently indicating a 27.7 percent chance the Fed will raise rates by another quarter point next month and a 39.2 percent chance of a quarter point rate hike in December.

The interest rate worries contributed to a continued surge by treasury yields, with the yield on the benchmark ten-year note jumping to its highest levels in sixteen years.

Key economic data due to be released in the coming days, including the closely watched monthly jobs report, could have a significant impact on the outlook for rates.

Sector News

Airline stocks saw substantial weakness on the day, resulting in a 2.8 percent nosedive by the NYSE Arca Airline Index. The index plummeted to its lowest closing level in nine months.

Significant weakness was also visible among software stocks, as reflected by the 2.6 percent plunge by the Dow Jones U.S. Software Index.

Interest rate concerns also weighed on housing stocks, dragging the Philadelphia Housing Sector Index down by 2.5 percent to a nearly four-month closing low.

Networking, financial and retail stocks also saw considerable weakness on the day, while some strength emerged among utilities stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan’s Nikkei 225 Index tumbled by 1.6 percent, while Hong Kong’s Hang Seng Index plunged by 2.7 percent.

The major European markets also moved to the downside on the day. While the U.K.’s FTSE 100 Index fell by 0.5 percent, the French CAC 40 Index and the German DAX Index slumped by 1.0 percent and 1.1 percent, respectively.

In the bond market, treasuries extended the sharp pullback seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, spiked 11.9 basis points to 4.802 percent.

Looking Ahead

Reports on private sector employment, service sector activity and factory orders may attract attention on Wednesday along with remarks by several Fed officials.

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