U.S. stocks stumbled again on Tuesday, with the S&P 500 falling more than 2% in its worst day of trading since May.
The S&P closed at 4,352.63, the latest in a series of days this month where markets have fallen sharply amid news of Evergrande Group’s struggles in China, ongoing negotiations to raise the U.S. debt ceiling, potentially higher interest rates, and continuing inflation.
The S&P was not the only index to close in the red on Tuesday. Tech stocks, which are traditionally more sensitive to interest rate hikes, performed especially poorly on Tuesday—causing a dismal showing for the Nasdaq Composite. The Nasdaq fell 2.8%, its biggest drop since March. The Dow Jones Industrial Average also closed down 1.63%.
Meanwhile, the 10-year Treasury yield continued to climb Tuesday, rising to 1.567%—its highest level since June—thanks to investors betting the Federal Reserve will soon start to curb its bond-buying program. “While no decisions were made, participants generally viewed that so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate,” Fed Chair Jerome Powell said last week.
September is historically a bad month for stocks, although in recent years that hasn’t always been the case. But so far, this year’s September has been rocked with volatility. The Chicago Board Options Exchange’s CBOE Volatility Index, which measures volatility expectations for the next 30 days, jumped to its highest level since May earlier this week.
“We are in an information vacuum at the moment,” Jamie Cox, managing partner at Harris Financial Group, told CNBC. “Stalemates in Congress on the debt ceiling, worries on policy changes or mistakes in monetary policy, and a litany of proposed tax increases have dampened the mood for investors. When this occurs, corrections happen.”
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