Graphic: Rising U.S. bond yields bring back Wall Street's sinking feeling

Graphic: Rising U.S. bond yields bring back Wall Street's sinking feeling

Shares in Facebook, Amazon, Apple, Netflix and Google's parent company Alphabet - the so-called "FAANG" stocks that have driven USA markets to all-time highs recently - all fell in NY trading.

"The indications we look at lead us to conclude this is likely to be yet another brief pullback in the context of a 9.5-year bull market with another 3-5 years left to go", Reynolds said in a note.

When all the dust settled after a brutal session, the Dow Jones Industrial Average had lost 3.2 per cent or 830 points to finish at 25,498.74, in the biggest fall since February.

Gina Martin Adams, the chief equity strategist for Bloomberg Intelligence, said investors are concerned about the big increase in yields, which makes it more expensive to borrow money.

United States government bonds resumed a selloff after rising to multi-year highs last week, with the 2-year yield rising to 2.906%, its highest level since June 2008. Concerns about consumer spending have also led to jitters about U.S. companies as they prepare to unveil results for the third quarter of the year over the coming weeks. That didn't happen Wednesday as stocks fell further late in the day.

The Nasdaq decline was its worst in percentage terms since the surprise Brexit vote in June 2016.

Stock prices have been hurt by rising interest rates, which have boosted Treasury yields over the last week.

"Both companies highlighted rising costs, not only input costs but increasing operating expenses [and] marketing expenses", she said.

Trade-sensitive industrial stocks also fell as tensions between Washington and Beijing persisted.

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Insurance companies slumped as Hurricane Michael hit the Florida Panhandle.

Although the losses were widespread, stocks that have been the biggest winners on the market, including technology companies and retailers, suffered steep declines.

For example, a yield rise in a month of one standard deviation or less, which would be 20 basis points now, is manageable for stocks, Goldman said in a note last week. The two-year yield rose to 2.88 percent from 2.87 percent, and the 30-year yield climbed to 3.38 percent from 3.37 percent.

Elsewhere, shares of Sears plummeted more than 37% after reports the cash-strapped retailer could file for bankruptcy protection as soon as this week.

Sears has closed hundreds of stores and sold several famous brands or put them on the block as it sees more customers abandon its stores. As of October 10, it's lasted 3,503 days.

Wholesale gasoline shed 2.7 per cent to $2.02 a gallon.

But historically, a monthly move of one to two deviations, or 20 to 40 basis points now, would result in flat S&P 500 returns. "As stocks go down, tech goes down more than the stock market". Investors see many of these countries as being vulnerable to higher USA interest rates, which can pull away investment dollars.

There were, however, slight lifts for Japan's Nikkei, which added 0.2 per cent, and Hong Kong's Hang Seng, which gained 0.2 per cent.

Rising costs, as inflation and borrowing rates pick up, could also be a worry for stock markets. Brazil's Bovespa lost 2.5 percent and the Merval in Argentina sank 2.2 percent.

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