The Dow stumbled Thursday, weighed down by falling energy and tech stocks with the latter pressured by rising Treasury yields as investors price in higher for longer Federal Reserve interest rate hikes to quell inflation.
The Dow Jones Industrial Average fell 0.6%, or 173 points, the Nasdaq was down 1.4% and the S&P 500 fell 1.1%.
Microsoft (NASDAQ:MSFT) fell more than 2% to lead the decline in big tech as the 10-year treasury yield continued to flirt with 15-year highs on bets of more hawkish Fed rate hikes after inflation data earlier this week surprised to the upside.
A 75-basis-point rate hike next week is almost priced in, according to Investing.com’s Fed Rate Monitor Tool. But the upside inflation seen earlier this week and the ongoing strength in the labor market have some betting on higher for longer rates.
The upside surprise in inflation, “coupled with the recent improvement in growth momentum and an uptick in labour demand, have led us to revise our outlook for the Fed once again,” Jefferies said in a note, forecasting the Fed to hike until its benchmark rate reaches 4.6%.
Better-than-expected jobless claims and retail sales data on Thursday, showed that the labour market remained tight and consumer spending continues to be resilient.
Energy was also a big drag on the broader market as oil prices fell more than 3% as energy demand fears persisted following the International Energy Agency’s warning oil demand will likely wane in the final quarter of the year.
Devon Energy Corporation (NYSE:DVN), Valero Energy Corporation (NYSE:VLO), Phillips 66 (NYSE:PSX) were among the biggest decliners in the sector, with the latter down more than 4%.
Rail stocks, however, were mostly higher, sidestepping the broader market meltdown after the White House struck a tentative deal between the freight rail operators and their unions to avert a rail strike that could disrupt food and fuel supplies.
Norfolk Southern (NYSE:NSC) and Union Pacific Corporation (NYSE:UNP) were in the green, but CSX Corporation (NASDAQ:CSX) was down more than 3%.
In crypto-related news, ether fell more than 5% after its long-awaited network upgrade or merge, was completed.
Following the upgrade, Ethereum moved on from the proof of work consensus – the existing mining-driven method to validated transactions on the Ethereum network — to a new proof of stake consensus.
