US stocks drop as tech rout deepens, hurt by climbing yields
US stocks fell on Tuesday, extending losses from Friday as Big Tech names declined and yields on 10-year Treasuries advanced, pressured by mounting corporate issuance.
The S&P 500 Index touched a session low, dropping 1.5% at 12:05 p.m. in New York, with all but one of 11 industry groups declining, led by technology firms. The Nasdaq 100 Index lost 1.8%, while a gauge of Magnificent Seven companies slid 2.3%. The Cboe VIX Index rose to near 20. The 10-year Treasury yield rose to 4.28%.
The US 10-year yield is “higher than it has been for all but 3% of the time over the past 18 years, and so there is a global concern surrounding these longer-term rates,” said Matt Maley, chief market strategist at Miller Tabak + Co. “All of us who have been worrying about the upcoming seasonally rough time for the stock market are looking prescient.”
A late Friday court decision is unnerving investors who’ve been looking for clarity about tariffs’ impact on inflation and company decision-making. Caterpillar Inc. extended losses for a second day after warning its tariff hit would be harder than anticipated. Plus, an unprecedented level of concentration in a just a handful of tech stocks is raising concern.
Nvidia Corp. led S&P 500 decliners by volume, shedding as much as 3.9% to touch the lowest intraday since late July. The stock dragged on underperforming chips firms as well. The Philadelphia Semiconductor Index dropped 2.53%.
As September kicks off, investors are also eying what’s historically been the weakest month for US stocks, as institutional investors rebalance, retail traders slow their buying, volatility picks up and corporate buying goes dark.
“CTAs are quasi full in their positioning, and volatility positioning in the from of VIX shorts has also been quite extended,” said Frank Monkam, head of macro strategy and trading at Buffalo Bayou Holdings. “Combining all these ingredients unfailing lead to pullbacks, particularly in richly-valued market conditions.”
The Tick Index, which measures the number of stocks going up, trade-by-trade, versus those going down on the New York Stock Exchange, plunged to minus 1,538 at some point during the session, the lowest level since July.
On the economic front, US factory activity shrank in August for a sixth straight month, driven by a pullback in production that shows manufacturing remains bogged down. The Institute for Supply Management’s manufacturing index came in at 48.7 last month. While a slight improvement from 48 in July, details of the report were mixed and the gauge remained in contraction territory.
Underlying data “remained weak,” and a rise in new orders seemed “hollow,” Inflation Insights President Omair Sharif said, with respondents’ commentary pointing to a drag on activity from tariffs.
Concern about political developments may also be weighing on the market. Russian President Vladimir Putin appears to have secured a diplomatic win with a massive pipeline deal that would tie Russia and China together for decades. Putin met with Xi Jinping and India’s Narendra Modi on Monday at a summit in the Chinese port city of Tianjin.
PepsiCo Inc. gained 2.29% on news that activist investor Elliott is planning a major campaign. Kraft Heinz Co. fell 6.56% after Warren Buffett said he was disappointed with its plan to split into two publicly traded companies.
Constellation Brands Inc. was among top S&P 500 decliners, falling 6.54%%, after the alcoholic drinks company cut its outlook, citing weak consumer demand and “more volatile consumer purchasing behavior.”
Gold stocks rose as the metal touched a record high. The commodity has jumped more than 30% this year.
Later this week, investors will focus on jobs data. Friday’s payrolls numbers are the most salient, but traders will also look at Wednesday’s JOLTS job openings and Thursday’s ADP employment report. Key earnings are due from two tech-sector heavyweights: Salesforce Inc. on Wednesday and Broadcom Inc. on Thursday.
President Donald Trump’s attempted firing of Fed Governor Lisa Cook continues to draw scrutiny as well, with Federal Housing Finance Agency Director Bill Pulte on Tuesday saying Federal Reserve Chair Jerome Powell isn’t holding Cook accountable.