Major U.S. stock indexes fell at least one percent on Tuesday, with analysts naming the increased job openings and the record-high Treasury yield as contributing factors to the decline.
The Dow Jones Industrial Average experienced its most significant decline since March, losing 430.97 points or 1.29 percent. It closed the day at 33,002.38. In September alone, the index decreased by 3.5 percent.
Meanwhile, the S&P 500 dipped by 1.37 percent, reaching its lowest level since June during the session to close at 4,229.45. It ended the month with a 4.9 percent decline, down 3.7 percent for the quarter. However, it still gained over 12 percent for the year.
The Nasdaq Composite saw a 1.87 percent drop, ending the day at 13,059.47, primarily due to the increase in interest rates. The Nasdaq-100 index, on the other hand, fell more than 5.8 points in September and 4.1 percent for the quarter. However, it went up a whopping 28 percent for the year.
A report showed that employers had opened 9.6 million positions in August, exceeding economists' expectations of 8.8 million jobs. This raised concerns that the Federal Reserve would continue raising interest rates, leading to weighed stock prices, a slow housing market and the possibility of an economic recession.
At the same time, the 30-year Treasury yield reached the highest level since 2007 at 4.925 percent. Stocks and benchmark yields moved in opposite directions throughout the day.
Risk avoidant hits new high
The CBOE volatility index, often called Wall Street's "fear gauge," reached its highest since late May.
"The scenario that most investors were assuming is the Fed would need to ultimately cut short-term rates, and we would return to a favorable interest rate environment. But investors are seeing a different scenario now - higher rates for longer."
Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
The dropping stocks could be due to seasonal weakness, as mentioned by Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance. According to Zaccarelli, this is "pretty normal" for the market in September and October.
However, he also pointed out that continued worries regarding elevated interest rates might lead to further declines in the stock market.
"The threat to equities is more along the interest rate side. We really need to get through this bond sell-off and find some type of equilibrium in the bond market before we think stocks will be able to find a bottom," he said.
Stocks breakdown
The SPDR S&P Homebuilders ETF (XHB) lost over two percent of its value, with Home Depot and Lowe's declining. Within the Dow, Goldman Sachs and American Express were among the hardest-hit stocks of the day.
Growth stocks like Nvidia and Microsoft lost ground as rising interest rates weighed on their valuations, which are based on the expectation of future earnings growth.
Microsoft stock closed at $321.80 on Tuesday, up 1.92 percent, but is still down 3.93 percent over the past month. Meanwhile, Nvidia stock fell one percent on Tuesday, extending its September losses of eight percent and approaching its longest losing streak since December 20.
Investors are preparing for U.S. companies to start releasing their earnings reports for the last quarter in the coming weeks. Some are optimistic that these results will improve market sentiment.