Stocks tumbled to their worst day in two months Tuesday, buckling under worries about higher interest rates and their tightening squeeze on Wall Street and the economy. Know more:
NEW YORK—Stocks tumbled to their worst day in two months Tuesday, buckling under worries about higher interest rates and their tightening squeeze on Wall Street and the economy.
The retailer said it would spend $1 billion to increase wages for hourly US and Canadian workers. That fed into broader worries for markets that rising costs for companies have been eating into profits, which are one of the main levers that set stock prices. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, leaped further to 3.95 percent from 3.82 percent late Friday. The two-year yield, which moves more on expectations for the Fed, rose to 4.72 percent from 4.62 percent. It’s close to its highest level since 2007.
Several reports have come in recently to show the economy remains stronger than expected. Those allay fears that the economy may soon fall into a recession, which is a positive for the market. But on the negative side, they could also fuel upward pressure on inflation and give the Fed more reason to stick to the “higher for longer” campaign it’s been espousing for rates.
The Fed said in December that its typical policy maker sees short-term rates rising to 5.1 percent by the end of this year with the earliest cut to rates happening in 2024. After earlier thinking the Fed would ultimately take it easier on rates than it was talking about, Wall Street has largely come into closer alignment with the Fed’s view.
Another threat for the market is that the Fed may not be as quick to cut rates in the face of economic weakness as it has in the past, said Truist’s Lerner.
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