Dow loses more than 400 points and goes negative for 2023 as interest rates spike: Live updates

Stocks tumbled on Tuesday as Treasury yields hit their highest levels since 2007, raising concern higher interest rates would freeze the housing market and tip the economy into a recession.

The Dow Jones Industrial Average lost 430.97 points, or 1.29%, for its worst day since March. The 30-stock index ended the day at 33,002.38. The S&P 500 slid 1.37%, touching its lowest level since June during the session and closing at 4,229.45. The tech-heavy Nasdaq Composite dropped 1.87% to end at 13,059.47 as growth stocks saw some of the biggest losses because of the rise in rates.

With Tuesday’s losses, the Dow went into the red for the year, off by 0.4%. The broader S&P 500 is still up 10% for 2023.

The 10-year Treasury yield touched 4.8%, reaching its highest level in 16 years. The benchmark yield has surged in the past month as the Federal Reserve pledged to keep interest rates at a higher level for longer. The 30-year Treasury yield hit 4.925%, also the highest since 2007. The average rate on a 30-year fixed mortgage neared 8%.

Seasonal weakness is “pretty normal” for the market in September and October, according to Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. However, he noted that ongoing concerns about higher interest rates could mean more downside is ahead for stocks.

“The threat to equities is more along the interest rate side. We really need to get through this bond sell-off, and find some type of equilibrium in the bond market, before we think stocks will be able to find a bottom,” he said.

The rise in yields poses “a major headwind to equities,” according to Alex McGrath, chief investment officer at NorthEnd Private Wealth.

Stocks traded inversely to bond yields throughout the day, moving lower each time as rates spiked. The latest catalyst for the rate boost was the release Tuesday of the August job openings survey, which signaled a tight labor market. The survey showed 9.6 million open roles in the month. Meanwhile, economists polled by Dow Jones had anticipated 8.8 million jobs. A strong labor market is allowing the Fed to tighten policy without fear it is going too far.

Fear spread on trading floors as the session continued, with the Cboe Volatility Index jumping to its highest level since May. That barometer rises when investors see more tumult ahead.

Stocks with the most to lose from rising rates and a potential recession led the day’s losses. The SPDR S&P Homebuilders ETF (XHB) shed more than 2% with Home Depot and Lowe’s falling. Goldman Sachs and American Express were the biggest losers in the Dow.

Big Tech names like Nvidia and Microsoft fell as higher interest rates dented enthusiasm for growth stocks trading on the promise of higher earnings down the road.