U.S. stocks fell sharply on Tuesday, with tech names dragging down the broader markets as Treasury yields traded near three-month highs and lawmakers in Washington continued their budget stalemate.
The Dow Jones Industrials plummeted 568.38 points, or 1.6%, to 34,299.99
The S&P 500 fell 90.48 points, or 2%, to 4,352.63.
The NASDAQ Composite cratered 423.29 points, or 2.8%, to 14,546.68, its worst day since March.
The weakness on Tuesday extended the losses for the major indexes in September. The NASDAQ is down 4.7% month to date, while the S&P 500 has skidded 3.8% and the Dow is down 3%,
Tech shares were dropping in morning trading as a rapid rise in rates makes their future cash flows less valuable, and in turn makes the popular stocks appear overvalued.
Tech shares fell as a rapid rise in rates makes their future cash flows less valuable, and in turn makes the popular stocks appear overvalued. Higher rates also hinder tech companies’ ability to fund their growth and buy back stock.
Facebook, Microsoft and Alphabet lost more than 3%, while Amazon dropped more than 2%. Large chip stocks struggled, with Nvidia sliding 4.5%.
While tech stocks dragged down the broader market, sectors tied to the economic reopening outperformed and energy names saw a slight gain. Shares of Ford rose 1% after the company announced plans to build new production facilities in the U.S.
Also weighing on sentiment was a budget showdown in Washington. Senate Republicans blocked a House-passed bill Monday that would have funded the government into December and suspended the debt ceiling until December 2022.
Congress must approve government funding by Friday to avoid a shutdown, and Treasury Secretary Janet Yellen warned Congress in a letter on Tuesday that lawmakers need to raise the debt limit by Oct. 18 to avoid a government default.
Thursday marks the final day of trading of September and the third quarter. The Dow is down 1.4% for the month, and the S&P 500 is off by 1.8%. The NASDAQ has lost 1.9% in September.
Prices for 10-Year Treasurys sagged, raising yields to 1.54% from Monday’s 1.49%. Treasury prices and yields move in opposite directions.
Oil prices lost 67 cents to $74.78 U.S. a barrel.
Gold prices subtracted $18.50 to $1,733.50 U.S. an ounce.