It was an awful day for markets. Let's jump straight into the numbers: The Dow Jones Industrial Average dropped 2.06% and the S&P 500 lost 2%. It was both indexes' worst day since Dec. 15. The Nasdaq Composite had an even poorer showing, losing 2.5%. Indeed, the recent outperformance of growth stocks on the Nasdaq could be a mere mirage. "We remain least preferred on the tech sector overall, especially US," said UBS.
U.S. markets were weighed down by lackluster outlooks from Walmart and Home Depot. Walmart's soft outlook suggests that consumers are feeling the pinch from rising prices. Meanwhile, Home Depot's struggles indicate that the housing market is still buckling under rising interest rates. That pessimism was reflected in the S&P — consumer discretionary stocks saw the largest decline of 3.3%.
Some analysts think stocks are facing the reality of higher interest rates — a scenario the bond market has priced in. On Tuesday, the 10-year Treasury yield climbed to 3.9%, while the 2-year rate rose to 4.7%, numbers not seen since November. "I think it's the equity markets that finally caught up to what the Treasury markets have been saying for a couple of weeks," said B. Riley Wealth's Chief Market Strategist Art Hogan. When the Federal Reserve's minutes are released Wednesday, markets will also find out what central bankers have been saying — and, perhaps for the first time this year, react accordingly.
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