Stocks close lower, Dow swings 400 points as Nasdaq sees longest losing streak in 6 years
By Joseph Adinolfi and William Watts
Russell 2000 records longest losing streak since December 2018
The Nasdaq has fallen for seven consecutive sessions. An earlier version of this story said it had fallen for nine sessions.
Stocks closed lower on Tuesday after a volatile session that saw the Dow swing roughly 400 points from peak to trough, while the Nasdaq Composite clinched its longest losing streak in six years.
What happened
Major stock indexes fell for a third straight week on Friday, with the Dow posting a 3% weekly decline, the S&P 500 declining more than 3% and the Nasdaq Composite shedding 4.2%.
What drove markets
Lingering concerns about the economic fallout from a European energy crisis were again in focus on Tuesday, as was the Federal Reserve's determination to dampen inflation by aggressively hiking interest rates.
Meanwhile, rising Treasury yields and a stronger dollar were seen weighing particularly on the Nasdaq, which recorded its seventh consecutive day in the red --the longest losing streak for the tech-heavy index since Nov. 4, 2016, according to Dow Jones Market Data.
In One Chart:Bad news for stocks: Fed will be surprised how hard interest-rate hikes hit economy, says BlackRock
Market strategists pointed to myriad factors weighing on stocks, which have been sliding for more than three weeks now.
"There's not a lot of demand for stocks right now, people are nervous. As for the causes, I think part of it is psychology, partly the strong dollar and partly higher bond yields -- they're all part of the recipe here," said Steve Sosnick, chief strategist at Interactive Brokers.
The higher yields and stronger dollar were both particularly negative for megacap tech stocks like
"We've seen an inverse relationship between tech stocks and long-term bond yields based on the notion that tech stocks are the ultimate long-duration asset. As yields spike, it creates big headwinds for stocks in general, and the leading tech stocks in particular," Sosnick added.
Yields climbed across the Treasury curve , but long-dated bonds saw the biggest moves, with the 10-year yield up nearly 14 basis points at 3.337%. Meanwhile, the ICE U.S. Dollar Index was back above 110, right around its strongest level in two decades.
The Russell 2000 , a closely watched index of small-cap stocks, dropped more than 17 points, or 0.9%, to 1,793.12, falling for a seventh-consecutive session -- its longest losing streak since Dec. 24, 2018, according to Dow Jones Market Data.
Investors received some good news on the economic-data front, as the Institute for Supply Management said its services index rose to 56.9% in August from 56.7% in the prior month -- the highest level since April. Economists polled by The Wall Street Journal had expected the index to drop to 55.5%. But it did little to help bail out stocks.
See: U.S. ISM services-sector index hits highest level in four months
As stocks fell, market strategists wondered whether the market was headed for a re-test of the June lows -- especially considering September's status as historically the worst month of the year for markets.
"Bulls hoping for a rebound will be doing so during a shortened Labor Day week that historically has paralleled September and its track record of underperformance: Losses have been slightly less frequent over the past three decades, but volatility has been higher," said Chris Larkin, managing director for trading at E-Trade from Morgan Stanley.
See:'The psychology has changed so quickly': Why stock-market lows may be retested as S&P 500 enters its weakest stretch of year
U.S. equities had initially bounced on Friday after the August nonfarm payrolls report was deemed not so strong that it would encourage the Fed to become even more aggressive in hiking interest rates.
But news later in the day that Russia would indefinitely shutdown the main gas pipeline to Europe, thereby adding to the chances of a sharp economic slowdown on the continent, pushed the S&P 500 back toward its lowest level since late July. And those concerns continued to reverberate across markets on Tuesday, even as the new Prime Minister Liz Truss promised immediate relief for high energy bills in the U.K.
In other news, Goldman Sachs chief economist Jan Hatzius offered a cautiously optimistic note on the ability of the Federal Reserve to deliver a so-called soft landing of the U.S. economy, averting recession as it continues to raise interest rates and otherwise tighten monetary policy.
-Joseph Adinolfi
Companies in focus
(END) Dow Jones Newswires
September 06, 2022 16:20 ET (20:20 GMT)
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