Published: Wed, May 16, 2018
Business | By Kate Woods

Dow Drops 200 Points as Yields Rise…and Rise…and Rise

Dow Drops 200 Points as Yields Rise…and Rise…and Rise

The Dow Jones industrial average fell 193 points to close at 24,706.41, with Home Depot among the biggest contributors of losses. The blue-chip Dow Jones grew by 68.24 points, with UnitedHealth and Walmart being the best-performing stocks in the index.

The S&P 500 fell 0.7 percent, to 2,711.45. The Nasdaq composite dropped 0.8 percent to 7,351.63 as Amazon, Microsoft and Google-parent Alphabet all pulled back more than 1 percent.

The broad sell-off Tuesday followed a spike in bond yields, which sent the 10-year Treasury yield to its highest in nearly seven years. In other words, you can earn higher income on risk-free short-term money than you can on stocks.

The probability that the USA central bank will raise its benchmark rate a fourth time this year went above 50 percent for the first time, according to the CME's FedWatch tracking tool for the fed funds futures market.

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"Yields on treasuries with shorter maturities are at their highest closing and intraday points in about a decade, continuing the basis point increases that began in September 2017 and have sustained so far this year", Tradeweb noted.

The Dow is down 124.76 points, or 0.5 percent. The surge came after the Commerce Department said retail sales climbed 0.3 percent in April, suggesting that spending by consumers is rebounding as expected after a weak first quarter. It also put investors in the mood to sell stocks in home builders.

The yield curve steepened from near its flattest levels since 2007, with the spread between the 2 year and 10 year bond yields widening 5bps to 50bps.

Stocks are opening moderately higher on Wall Street, led by gains in technology, health care and energy companies. Chip maker Nvidia fell 3.8 percent; drug maker Celgene slid 3.9 percent. Brent crude, used to price global oil, added 20 cents to close at $78.43 a barrel in London.

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CURRENCIES: The dollar rose to 110.38 yen from 109.66 yen late Monday. Soon-to-be NY Fed President Williams noted that "inflation has just barely reached our 2 percent goal" and said that he thought the chances of two or three additional hikes this year were reasonably balanced.

The greenback's gains weighed on precious metals prices. Gold fell $27.90, or 2.1 percent, to $1,290.30 an ounce.

The Russell 2000 is up 64.83 points, or 4.2 percent. Natural gas dipped a penny to $2.84 per 1,000 cubic feet. Essex Property Trust fell 3.4 percent. Britain's FTSE 100 added 0.2 percent. South Korea's Kospi slipped 0.7 percent.

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