4:19pm: Treasury yields continue to rise
The Dow closed Tuesday down 431 points, 1,3%, at 33,002, the Nasdaq Composite dipped 248 points, 1.9%, to 13,059 and the S&P 500 fell 59 points, 1.4%, to 4,229. The small-cap Russell 2000 index slid 28 points, 1.6%, to 1,728.
The DJIA's loss was large enough that the index slipped into negative territory for 2023 as a whole.
The broad selloff came as the !0-year Treasury yield rose to 4.81%, its highest level since 2007. If it continues to rise, that's likely to be a sinigificant headwind for markets, according to Alex McGrath, chief investment officer at NorthEnd Private Wealth.
“Unless that stays flat or starts moving backwards, it’s just going to be a major headwind to equities across the board going through the end of the year,” McGrath said.
12:00am: Stocks slide after rise in job vacancies
Stocks fell further, and bond yields rose, after strong jobs data added to the narrative that interest rates will stay high for some time to come.
At midday, the Dow Jones Industrial Average was down 427.38 points, 1.3%, at 33,005.97, the S&P 500 was down 62.75 points, 1.5%, at 4,225.64 and the Nasdaq Composite was down 235.17 points, 1.8%, at 13,072.60.
"Stronger-than-expected US job openings, indicating a robust labour market, reinforce the 'rates higher for longer' fear that market players have and leads to risk-off sentiment with oil, gold and silver also seeing declines," said Axel Rudolph at IG.
The number of job openings in the US jumped more than expected at the end of August, data from the US Bureau of Labor Statistics showed.
The number of job openings increased 690,000 to 9.61 million on the last business day of August, from 8.92 million at the end of July, and well ahead of forecasts for a fall to 8.8 million.
Nancy Vanden Houten, US lead economist at Oxford Economics said: "Job openings in the Jolts report surged in August, more than reversing the July decline."
"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."
"The Fed won't make policy decisions based on one Jolts report, but it does keep the risks tilted toward another rate hike."
9:39am: Bond sell-off resumes sending stocks lower
US stocks opened in the red as the bond sell-off resumed as investors grow increasingly worried about the long-term effects of higher interest rates.
Shortly after the opening bell, the Dow Jones Industrial Average was down 144.89 points, 0.4%, at 33,288.46, the S&P 500 was down 18.83 points, 0.4%, at 4,269.56 and the Nasdaq Composite was down 84.45 points, 0.6%, at 13,223.33.
The US 30-year yield rose to the highest level since 2007, and 10-year rates rose for a second day touching 4.74%.
There are concerns that higher rates will stop economic growth in its tracks, hurt the housing market and damage government finances.
Goldman Sachs (NYSE:GS) said a sharp rise in long-term interest rates combined with widening deficits and heightened fiscal discord in Congress has renewed questions about the sustainability of rising government interest costs.
It projects federal interest expense will rise from 2% of GDP in 2022 to 3% in 2024 and 4% by 2030, surpassing the early 1990s peak by 2025.
On average over the next decade, higher interest expense is likely to add an additional 0.3% of GDP to the annual deficit compared to its July projections.
As a result, Goldman has raised its deficit estimates for FY2024 by $50 billion to $1.7 trillion (6.0% of GDP) and FY2025 by $100 billion to $1.9 trillion (6.5% of GDP).
Elsewhere, Eli Lilly & Co said it has reached an agreement to buy Point Biopharma Global Inc, a radiopharmaceutical company with a pipeline of clinical and preclinical-stage radioligand therapies in development for the treatment of cancer for $1.4 billion, payable at closing.
HP Inc (NYSE:HPQ) shares rose 2.3% after Bank of America upgraded to buy and raised its price target to $33.
7:00am: Modest gains expected on Wall Street
US markets look set for modest gains when trading resumes on trading as investors await the first of a series of updates on the health of the labour market.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.1% higher, while those for the S&P 500 rose 0.1%, and contracts for the Nasdaq 100 futures were also up 0.1%.
Hawkish comments from a number of Federal Reserve officials on Monday kept stocks mixed offsetting the better news that the government had avoided a shutdown, for now at least.
Ipek Ozkardeskaya at Swissquote Bank explained the “Fed’s Michelle Bowman said that multiple more interest rate hikes could be needed to tame inflation, while Micheal Barr repeated that the rates are likely restrictive enough, but they should stay higher for longer.”
This kept interest in the greenback strong while the 10-year treasury yield also spiked.
Today, economists expect the Jolts data to show August job openings held steady at around 8.8 million from the prior month.
Later in the week, ADP private payrolls figures and weekly jobless claims numbers are due ahead of the employment report on Friday.
Bank of America expects a solid US employment report, with payrolls up by 185,000 (compared to 187,000 in August), average hourly earnings up 0.3% m/m, and unemployment down by 20 percentage points to 3.6%.
Elsewhere, Raphael Bostic, president of the US Federal Reserve’s Atlanta branch, will participate in a roundtable in the city on the 2024 economic outlook, but will no doubt add his views into the interest rate debate.