© Reuters.
By Yasin Ebrahim
Investing.com -- The Dow suffered a rout Tuesday as mounting fears of further rate hikes pushed Treasury yields higher to keep tech stocks in the crosshairs, while a Home-Depot-infused slump in retailers also weighed on sentiment.
The Dow Jones Industrial Average fell 2.1%, or 697 points, and the S&P 500 was down 2%, while the Nasdaq Composite slumped 2.5%.
The 10-year Treasury yield rallied to flirt with the 4% handle for the first time since Nov. 10 as investor expectations for a cut this year dwindle and fears grow that the Fed peak level of rates could be higher than expected.
With a March and May hike nearly priced in, the odds of a June hike increased to 59%, compared with 50% last week, according to Investing.com’s Fed Rate Monitor Tool. A June hike would lift rates beyond what the Fed previously projected in December. The odds of the Fed funds rates reaching 5.5%-to-5.75% by June, meanwhile, has tripled to 16% from about 5% last week.
The hawkish repricing of the Fed's path of rate hikes has ushered in volatility, pushing the S&P 500 VIX, or the "fear-index," sharply higher.
"[M]arkets are likely to experience bouts of volatility in the coming months as they grapple with uncertainties over economic growth, geopolitics and monetary policy," Wells Fargo said in a note.
Investors will look to the Fed’s minutes due Wednesday for further insight into the central bank’s thinking on monetary policy measures.
The surge in rates, meanwhile, continued to pierce through growth sectors including tech, as Apple Inc (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL), and Microsoft Corporation (NASDAQ:MSFT) closed more than 2% lower.
Sentiment on chip stocks was dented by fresh signs of softer demand amid a report that Intel (NASDAQ:INTC) delayed an order for semiconductors from Taiwan Semiconductor Manufacturing (NYSE:TSM) until next year.
Consumer discretionary, meanwhile, was hurt by a slump in retailers following quarterly results from Home Depot and Walmart – major Dow components – that flagged concerns about the strength of the consumer.
Home Depot (NYSE:HD) fell more than 7% after it reported fourth-quarter results that missed on the bottom line, and guided for 2023 earnings a share to decline by a mid-single-digit percentage, compared with Wall Street expectations for flat earnings.
In its post-earnings call, the home improvement retailer said it expected a “moderation in home-improvement demand,” amid “heightened inflation and rising interest rates, a tight labor market and moderating equity and housing markets.”
Walmart (NYSE:WMT) cut intraday losses to close less than 1% higher despite reporting guidance that fell short of expectations, while quarterly results beat on both the top and bottom lines.
The supermarket giant said in an earnings call that while “stubborn inflation” was hurting consumers, it is “gaining share across income cohorts, including at the higher end.”
General Mills (NYSE:GIS) bucked the trend of disappointing outlooks from retailers after upgrading its full-year forecast on revenue and earnings, sending its shares more than 4% higher.
In other news, DocuSign (NASDAQ:DOCU) slumped almost 8% after UBS downgraded the company to Sell from Neutral amid valuation concerns following the stock's rally from its December lows.
