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Bond Spike Spooks US Stocks Tuesday    09/28 16:01

   Technology companies led a broad slide in stocks on Wall Street Tuesday, 
deepening the market's September swoon. The selling came as a swift rise in 
Treasury yields forces investors to reassess whether prices have run too high 
for stocks.

   (AP) -- Technology companies led a broad slide in stocks on Wall Street 
Tuesday, deepening the market's September swoon.

   The S&P 500 fell 2%, its worst drop since May. The tech-heavy Nasdaq dropped 
2.8%, its biggest drop since March. Decliners outnumbered advancers on the New 
York Stock Exchange 4 to 1.

   The benchmark S&P 500 is down 3.8% so far this month and on pace for its 
first monthly loss since January. The September slump has been an exception to 
a mostly steady stream of gains so far this year that has brought the S&P 500 
up 15.9% since the beginning of 2021.

   The selling came as a swift rise in Treasury yields forces investors to 
reassess whether prices have run too high for stocks, particularly the most 
popular ones. The yield on the 10-year Treasury note, a benchmark for many 
kinds of loans including mortgages, jumped to 1.54%. That's its highest level 
since late June and up from 1.32% a week ago.

   Bond yields started rising last week after the Federal Reserve sent the 
clearest signals yet that the central bank is moving closer to begin 
withdrawing the unprecedented support it has provided for the economy 
throughout the pandemic. The Fed indicated it may start raising its benchmark 
interest rate sometime next year and will likely begin cutting back the pace of 
its monthly bond purchases before the end of this year.

   "All of that is taking one of the weights that had been holding yields low 
and removing it," said Sameer Samana, senior global market strategist at Wells 
Fargo Investment Institute. "That clearly has a big impact on larger cap, 
higher growth, higher multiple stocks."

   A rise in yields means Treasuries are paying more in interest, and that 
gives investors less incentive to pay high prices for stocks and other things 
that are riskier bets than super-safe U.S. government bonds. The recent upturn 
in rates has hit tech stocks particularly hard because their prices look more 
expensive than much of the rest of the market, relative to how much profit 
they're making.

   Many tech stocks also got bid up recently on expectations for big profit 
growth far in the future. When interest rates are low, an investor isn't losing 
out on much by paying high prices for the stock and waiting years for the 
growth to happen. But when Treasuries are paying more in the meantime, 
investors are less willing.

   The S&P 500 fell 90.48 points to 4,352.63. The Dow Jones Industrial Average 
fell 569.38 points, or 1.6%, to 34,299.99. The blue-chip index briefly fell 614 
points.

   Small company stocks also lost ground. The Russell 2000 index dropped 51.23 
points, or 2.2%, to 2,229.78.

   This week's swoon for the market is reminiscent of an episode early this 
year when expectations for rising inflation and a stronger economy sent 
Treasury yields climbing sharply. The 10-year yield jumped to nearly 1.75% in 
March after starting the year around 0.90%. Tech stocks also took the brunt of 
that downturn.

   Chipmaker Nvidia fell 4.4%, Apple slid 2.4% and Microsoft fell 3.6%. The 
broader technology sector has also been contending with a global chip and parts 
shortage because of the virus pandemic and that could get more severe as a 
power crunch in some parts of China shuts down factories.

   Communications companies also weighed down the market. Facebook and Google's 
parent company, Alphabet, each fell 3.7%.

   Energy was the only sector in the S&P 500 that wasn't in the red. Exxon 
Mobil rose 1% and Schlumberger gained 2.4% for the biggest gain among S&P 500 
stocks.

   Another lingering market worry resonating from China is the possible 
collapse of one of China's biggest real estate developers. Evergrande Group is 
struggling to avoid a default on billions of dollars of debt.

   Markets in Asia were mixed while markets in Europe fell.

   Investors have been dealing with a choppy market in September as they try to 
gauge how the economic recovery will progress and how it will impact various 
industries.

   COVID-19 remains a lingering threat and is still taking its toll on 
businesses and consumers. Economic data on consumer spending and the employment 
market has been mixed. U.S. consumer confidence declined for the third straight 
month in September, according to a report from The Conference Board.

   Companies are warning that supply chain problems and higher prices could 
crimp sales and profits. The Federal Reserve has maintained that rising 
inflation is temporary and tied to those supply chain problems as the economy 
recovers from the pandemic. Investors are still concerned that higher inflation 
could be more permanent and rising bond yields reflect some of those worries.

   "The bottom line is that the supply chain thesis is really being tested and 
the Fed, businesses and consumers have had to react to some of the 
on-the-ground realities," said, Eric Freedman, chief investment officer at U.S. 
Bank Wealth Management.

 
 
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