4:10pm: "Investors are still on edge," analyst says
The Dow closed Tuesday down 388 points, 1.1%, at 33,619, the Nasdaq Composite slid 208 points, 1.6%, to 13,064 and the S&P 500 declined 64 points, 1.5%, to 4,274. The small-cap Russell 2000 index fell 19 points, 1.1%, to 1,765.
The Dow and S&P each suffered their worst session since March.
Consumer confidence dropped for the second consecutive month in September as people’s short-term outlook for business, the labor market and income conditions worsened. Meanwhile, 10-year Treasury yields reached their highest level since 2007 this week.
“Investors are still on edge, nervous, about what the rise in bond yields have to say about the economy, about the stock market, about the Fed, as well as the value of the dollar,” said Sam Stovall, chief investment strategist at CFRA Research. “I think investors lack clarity and therefore are deciding to lighten up.”
12:00pm: Stocks fall further as consumer confidence drops
US stocks fell further as a drop in consumer confidence added to concerns that slower growth could accompany higher interest rates.
At midday, the Dow Jones Industrial Average was down 310.56 points, 0.9%, at 33,696.32, the S&P 500 was down 49.74 points, 1.2%, at 4,287.70 and the Nasdaq Composite was down 170.18 points, 1.3%, at 13,101.14.
Axel Rudolph at online trading platform IG said: "Hawkish commentary by Fed officials mentioning one more rate hike, some $134 billion of new government debt sales this week and the risk of a US government shutdown are too much for stock investors."
The mood was not helped by a drop in consumer confidence for the second consecutive month in September as people’s short-term outlook for business, the labour market and income conditions worsened.
The Conference Board’s consumer confidence index fell to 103 this month, down from an upwardly revised 108.7 in August.
The “disappointing” reading was driven by deteriorating consumer outlooks, including growing recession fears, said Conference Board chief economist Dana Peterson.
Elsewhere, sales of new single-family homes dropped to a weaker than expected pace in August, but still remained at elevated levels from a year ago owing to robust demand for newly-built residences.
Sales slipped to an annualised rate of 675,000 in August, from an upwardly revised rate of 739,000 in July. That surpassed economists’ forecasts for 700,000 new home sales.
9:40am: Stocks tumble as rate worries continue to dent the mood
Stocks opened lower as Treasury yields hit fresh highs as investors continue to adjust the likelihood of interest rates staying higher, for longer.
Shortly after the opening bell, the Dow Jones Industrial Average was down 147.74 points, 0.4%, at 33,859.14, the S&P 500 was down 27.60 points, 0.6%, at 4,309.84 and the Nasdaq Composite was down 94.52 points, 0.7%, at 13,176.80.
Investors are also grappling with negotiations in Washington, as lawmakers hope to avert a government shutdown that could take place as early as October 1 if Congress doesn’t agree on a spending bill.
"[R]isky assets, particularly long-duration stocks, have struggled to absorb these rate increases...the correlation between equity prices and bond yields has turned negative again, reflecting the 'good news is bad news' sentiment in the U.S.," SPI Asset Management said.
Since the Federal reserve's decision to leave interesr rates unchanged last Wednesday a series of Fed officials have reinforced the message that they will keep policy tighter for longer if the economy is stronger than expected.
Federal Reserve Bank of Minneapolis President Neel Kashkari said he expects the US central bank will need to raise interest rates one more time this year.
JPMorgan Chase CEO Jamie Dimon warned interest rates may need to rise further to tamp down inflation,
Dimon said in an interview with The Times of India that the Fed’s key borrowing rate could rise significantly from its current targeted range of 5.25%-5.5%.
Apple shares fell 1.0% after the EU's digital chief Thierry Breton told Apple chief executive officer Tim Cook that the iPhone maker must open up its products to competitors as part of Brussels' tough curbs on big tech companies.
Tesla was also weaker, down 0.8%, after reports it has been dragged into the EU’s tussle with China over protectionism after the company was named as one of the carmakers subject to a probe by the bloc.
The electric vehicle maker will be part of the EU’s investigation into whether China’s EV market is receiving unfair subsidies, according to its most senior trade official.
In economic news, house prices continued to rise in July, despite the burden of higher interest rates on the property sector.
The Federal Housing Finance Agency reported that US house prices rose by 0.8% in the month of July, and were 4.6% higher than a year ago.
Dr Nataliya Polkovnichenko, supervisory economist in FHFA’s Division of Research and Statistics, said: "Regionally, all nine census divisions posted positive price appreciation over the last 12 months, although the Pacific and Mountain divisions experienced only modest growth.”
7:00am: Stocks called lower as Moody's warns over credit rating
US stocks are expected to head lower on Tuesday after Moody’s warned the country’s top credit rating was at risk if politicians fail to avert a government shutdown.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.4% lower, while those for the S&P 500 fell 0.5%, and contracts for the Nasdaq futures were down 0.5%.
Investors, already dealing with the prospects of higher interest rates for longer, are facing a new threat as lawmakers in Washington aim to avert a government shutdown that could take place as early as October 1, if Congress doesn’t agree on a spending bill.
Moody's Investors Service, the only remaining major credit grader to assign the US a triple A credit rating, signalled that its confidence is wavering.
"While government debt service payments would not be impacted and a short-lived shutdown would be unlikely to disrupt the economy, it would underscore the weakness of US institutional and governance strength relative to other Aaa-rated sovereigns that we have highlighted in recent years," analysts led by William Foster wrote in a report.
In economic news, the Conference Board will release its consumer confidence index for September, which economists expect will tick down to a reading of 105.6 from 106.1 in August.
Meanwhile, US new home sales are forecast to have decreased to an annualised rate of 700,000 in August from 714,000 in July.
Elsewhere, the words of US Federal Reserve governor Michelle Bowman will be scrutinised as she give the opening remarks on rental housing affordability at a Fed housing market forum.