Wall Street dropped sharply on Tuesday, as concerns over marquee companies warning of higher costs were exacerbated by the benchmark U.S. 10-year Treasury yield piercing the 3-percent level for the first time in four years.
Google-parent Alphabet sank 4.9 percent, erasing all its gains for the year, as investors focused on the company’s rising expenses and shrinking margins, rather than a profit beat.
Caterpillar sank 6.6 percent, after it warned of the impact of steel price hikes on its business. The stock had gained as much as 4.6 percent earlier on a strong set of quarterly results and full-year outlook.
The 10-year yield, a benchmark for global borrowing costs, has been driven steadily higher by a combination of concerns over inflation, growing debt supply, and rising Federal Reserve borrowing costs.
“There are factors that are adding to inflation pressure like a tightening labor market, trade tension and rising commodity prices,” said Bill Northey, senior vice president with U.S. Bank Wealth Management in Helena, Montana
“These higher Treasury yields are providing competition with riskier fixed income products and things like REITs and dividend-producing stocks.”
At 1:54 p.m. ET, the Dow Jones Industrial Average was down 523.11 points, or 2.14 percent, at 23,925.58, the S&P 500 was down 41.90 points, or 1.57 percent, at 2,628.39, and the Nasdaq Composite was down 132.62 points, or 1.86 percent, at 6,995.98.
While industrial stocks hit the Dow, the Nasdaq was pulled down by a sharp drop in the ‘FAANG’ group of technology stocks.
Facebook, which reports on Wednesday, fell 3.6 percent after a report that the social network hosted stolen identities and social security numbers.
Apple was down 1.7 percent, falling for the fifth straight session as comments from chipmaker AMS and smartphone screen maker Corning fed fears of slowing demand for iPhones.
Amazon and Netflix also succumbed to the pressure.
“Rising U.S. yields are hurting equities in general, when you combine with the weakness in FAANG stocks, it makes for a tough day in the market,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
Other notable laggards included Lockheed Martin, which sank 7.4 percent after the Pentagon’s No.1 weapons supplier failed to raise its outlook for cash flow. 3M dived 8.6 percent after it cut the top end of its full-year forecast.
Declining issues outnumbered advancers by a 2.23-to-1 ratio on the NYSE. Declining issues outnumbered advancers by a 2.06-to-1 ratio on the Nasdaq.
The S&P index recorded 13 new 52-week highs and 19 new lows, while the Nasdaq recorded 56 new highs and 72 new lows.