Technology companies led a broad sell-off on Wall Street Tuesday as bond yields surged amid renewed jitters that the Federal Reserve will act more aggressively than expected to tackle rising inflation.
The S&P 500 fell 1.8%, with about 90% of the stocks in the benchmark index closing in the red. The Nasdaq, which is heavily weighted with technology stocks, slid 2.6%. The Dow Jones Industrial Average fell 1.5%.
The major indexes’ losses have mounted this month as rising inflation and the virus pandemic’s latest surge cause investors to take caution.
Heightened expectations of a rate hike from the Fed have kept Treasury yields rising. The 10-year Treasury hit 1.87% Tuesday, the highest since January 2020. It was at 1.77% late Friday.
Investors are now pricing in a better than 86% probability that the Fed will raise short-term rates at its meeting of policymakers in March. A month ago, they saw less than a 47% chance of that, according to CME Group.
The 10-year yield “just continues to trudge higher, pricing in a more and more aggressive Federal Reserve,” said Ross Mayfield, investment strategy analyst at Baird. “Until over the weekend, I hadn’t seen any speculation about two rate hikes at the March meeting, and now you’re starting to hear that chatter.”