On Tuesday, U.S. stocks took a downward turn as Treasury yields surged, following a couple of strong economic reports that dashed hopes for significant Federal Reserve interest rate cuts this year.
The Nasdaq Composite fell sharply, dropping 375.30 points, or 1.9%, closing at 19,489.68. For the tech-focused index, it was the toughest day since December 18, according to data from Dow Jones Market Data.
Meanwhile, the S&P 500 slipped 66.35 points, or 1.1%, finishing the day at 5,909.03.
The Dow Jones Industrial Average also faced a decline, losing 178.20 points, or 0.4%, to close at 42,528.36. This marked the worst performance for the blue-chip index since December 30, based on Dow Jones Market Data insights.
Interest rates climbed, with the 10-year Treasury note yield rising nearly 7 basis points to reach 4.684% on Tuesday afternoon, its highest level since April 25 of last year. The 30-year rate saw an increase of over 7 basis points hitting 4.91%, the highest since November 2023.
Brent Schutte, who serves as the Chief Investment Officer at Northwestern Mutual Wealth Management Company, expressed concerns. “I think there’s a level at which rates rise enough that investors begin to worry that it hurts the entirety of the equity market because it hurts the economy more,” he explained.
In his conversation with MarketWatch, Schutte noted that the rising yields are starting to affect a broader portion of the stock market, even impacting the seemingly resilient “Magnificent Seven.”
Schutte added, “I do believe in relative valuation, and with higher levels of interest rates, Treasurys are becoming more competitive against a relatively expensive stock market.”
