On Tuesday, Wall Street’s primary indexes experienced declines due to higher Treasury yields impacting significant growth stocks. This, coupled with discouraging data on services activity in China, triggered concerns about demand in the world’s second-largest economy.
The yield on 10-year Treasury notes rose to 4.23%, while the two-year yield reached 4.928% in anticipation of upcoming economic data releases later this week.
Major technology-oriented stocks like Apple, Amazon, and Alphabet saw losses ranging from 0.4% to 1.2%. Investors expressed concerns about the overall economic and profit environment for many corporations. Jason Pride, Chief of Investment Strategy and Research at Glenmede, noted that there are signs of economic weakness in both China and Europe.
China’s services sector displayed its slowest expansion in eight months in August, as persistent weak demand continued to challenge the country’s economy despite stimulus efforts.
Shares of U.S.-listed Chinese companies, including PDD Holdings, JD.com, Baidu, and Alibaba, experienced declines ranging from 0.5% to 2.9%.
The energy sector provided some relief, posting a 0.9% gain, in response to higher oil prices following an announcement by Saudi Arabia and Russia regarding an extension of their voluntary supply cuts.
The S&P 1500 airlines index, however, dropped 2.5%.
Recent U.S. economic data releases since the Federal Reserve’s July meeting have indicated a cooling but not a cracking economy, which strengthens the case against further interest rate hikes.
As traders return from the Labor Day holiday, attention will shift to upcoming data releases, including the consumer price index report next week and the Fed’s policy decision scheduled for September 20.
According to the CME FedWatch tool, traders are increasingly betting on the Fed keeping rates unchanged in the next policy meeting, with a 93% probability. Additionally, there is a 58.2% likelihood of a pause in November, up from 52% the previous week.
Meanwhile, Goldman Sachs has lowered the probability of a U.S. recession in the next 12 months from 20% to 15%, citing ongoing easing inflation and labor market data.
At 9:50 a.m. ET, the Dow Jones Industrial Average was down 78.72 points (0.23%) at 34,758.99, the S&P 500 was down 14.87 points (0.33%) at 4,500.90, and the Nasdaq Composite was down 49.11 points (0.35%) at 13,982.71.
In premarket trading, shares of Airbnb and Blackstone gained 7.1% and 3.3%, respectively, as both companies were set to join the S&P 500 index.
Declining issues outpaced advancers by a ratio of 3.13-to-1 on the NYSE and 1.97-to-1 on the Nasdaq.
The S&P index recorded eight new 52-week highs and 13 new lows, while the Nasdaq had 27 new highs and 63 new lows.
