Stocks Slump as Hawkish Fed and Oil Prices Combine
The US stock market declined on Tuesday as rising global bond yields and crude prices weighed heavily on investor sentiment. The benchmark U.S. Treasury yield reached a 19-month high, further exacerbating inflation fears. Analyst Ross Mayfield attributed the decline to the 'perfect cocktail' of hawkish comments from Federal Reserve Chair Kevin Warsh and rising hostilities in the Middle East.
The energy sector saw a boost from crude prices, but other sectors suffered losses. The Dow Jones Industrial Average fell 418.97 points, or 0.79%, to 52,766.93, while the S&P 500 lost 54.67 points, or 0.71%, to 7,631.47.
The Philadelphia SE Semiconductor Index dipped 2.1%, with every constituent losing ground on the day. The Federal Reserve's hawkish stance is driving up interest rate hike expectations, with a 68.2% likelihood of a 25-basis-point rate hike at the end of its September policy meeting.