NEW YORK (TIP): It was a bad day for US stocks on Tuesday (Sept 28) as poor consumer confidence data, rising bond yields and fears of a debt default caused indices to sink sharply.
Trading started on a sour note when the Conference Board reported its US consumer confidence index slumped for the third straight month as the fast-spreading Delta variant of Covid-19 made Americans wary of economic conditions.
There was little apparent progress throughout the day in Washington, where lawmakers must approve both a resolution to keep the government running and an increase in the debt ceiling to prevent a default, which the Treasury warned could come around Oct 18.
The impasse fuelled a selloff on Wall Street, and the benchmark Dow Jones Industrial Average closed 1.6 per cent lower at 34,299.99.
The broad-based S&P 500 fell 2 per cent to 4,352.63, while the tech-rich Nasdaq Composite Index lost 2.8 per cent to 14,546.68.
Analysts at Wells Fargo pointed to an increase in yields on US Treasury bonds, saying they are “inciting a perceived ‘risk off’ mood”.
The benchmark 10-year bond was yielding nearly 1.55 per cent shortly after markets closed.
Traders are looking ahead to Thursday’s joint testimony before Congress by Treasury Secretary Janet Yellen, and Federal Reserve chairman Jerome Powell. Yellen will likely again warn of the dire consequences of not raising the debt ceiling, and also face questions about President Joe Biden’s twin proposals to overhaul US infrastructure and social services at the cost of trillions of dollars.
Powell may comment on the central bank’s plans to cut back on its massive monthly purchases of bonds and other securities, which was first implemented last year to help the economy as the pandemic began. That programme has been criticised for fuelling inflation, though last week, central bankers said it may “soon” be time to starting slowing them – which could cause market turbulence, as they are seen as helping equities prosper. Source: AFP