U.S. Stocks Seeing Further Downside Following Early Sell-Off

After moving sharply lower early in the session, stocks continue to see significant weakness in afternoon trading on Tuesday. The major averages have more than offset the gains posted in the previous session, falling to their worst intraday levels in over three months.

The major averages have seen further downside in recent trading, hitting new lows for the session. The Dow is down 393.85 points or 1.2 percent at 33,613.03, the Nasdaq is down 195.76 points or 1.5 percent at 13,075.56 and the S&P 500 is down 60.37 points or 1.4 percent at 4,277.07.

Early selling pressure picked up following the release of separate reports showing a sharp pullback in new home sales and a significant deterioration in consumer confidence.

The Commerce Department released a report showing new home sales plummeted by 8.7 percent to an annual rate of 675,000 in August after soaring by 8.0 percent to an upwardly revised rate of 739,000 in July.

Economists had expected new home sales to decrease to an annual rate of 700,000 from the 714,000 originally reported for the previous month.

With the upward revision, the annual rate of new home sales in July was the highest since hitting 773,000 in February 2022.

A separate report released by the Conference Board showed its consumer confidence index tumbled to 103.0 in September from an upwardly revised 108.7 in August.

Economists had expected the consumer confidence index to edge down to 105.8 from the 106.1 originally reported for the previous month.

“Write-in responses showed that consumers continued to be preoccupied with rising prices in general, and for groceries and gasoline in particular,” said Dana Peterson, Chief Economist at The Conference Board. “Consumers also expressed concerns about the political situation and higher interest rates.”

Concerns about the outlook for interest rates also continue to weigh on Wall Street, with JPMorgan Chase (JPM) CEO Jamie Dimon warning in an interview with The Times of India that rates could go as high as 7 percent.

“I am not sure if the world is prepared for 7%,” Dimon said. “I ask people in business, ‘Are you prepared for something like 7%?’ The worst case is 7% with stagflation.”

“If they are going to have lower volumes and higher rates, there will be stress in the system,” he added. “We urge our clients to be prepared for that kind of stress.”

Minneapolis Federal Reserve President Neel Kashkari also wrote in an essay posted on Tuesday that there is a 40 percent chance the Federal Reserve will have to push rates “meaningfully higher” to combat stubborn services inflation.

Last week, the Fed left interest rates unchanged as widely expected but forecast another rate hike before the end of the year as well as keeping rates at elevated levels for longer than previously anticipated.

Sector News

Gold stocks have moved sharply lower over the course of the session, dragging the NYSE Arca Gold Bugs Index down by 2.4 percent to its lowest intraday level in a month.

The weakness among gold stocks comes amid a decrease by the price of the precious metal, with gold for December delivery falling $16.80 to $1,919.80 an ounce.

Significant weakness has also emerged among interest rate-sensitive utilities stocks, resulting in a 2.0 percent slump by the Dow Jones Utility Average.

Retail stocks also continue to see considerable weakness in afternoon trading, as reflected by the 1.8 percent drop by the Dow Jones U.S. Retail Index. The index has fallen to a three-month intraday low.

Considerable weakness is also visible among software stocks, as reflected by 1.4 percent loss being posted by the Dow Jones U.S. Software Index.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan’s Nikkei 225 Index slumped by 1.1 percent, while Hong Kong’s Hang Seng Index tumbled by 1.5 percent.

Most European stocks also moved to the downside on the day. While the German DAX Index slumped by 1.0 percent and the French CAC 40 Index slid by 0.7 percent, the U.K.’s FTSE 100 Index bucked the downtrend and closed just above the unchanged line.

In the bond market, treasuries have pulled back near the unchanged line after seeing early strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 4.546 percent after hitting a low of 4.483 percent.

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