Stocks Tumble, VIX Spikes As Fear Over High Interest Rates Intensifies: What's Driving Markets Tuesday?

Stocks are deep in the red during midday trading on Tuesday, with September proving to be a negative month for Wall Street, as has traditionally been the case.

All major indices, as well as every individual sector within the S&P 500 index, experienced declines throughout the day. The CBOE Volatility Index (VIX), also known as the “fear index”, rocketed 9% hitting its highest level since Aug. 18.

Investors fear that the Fed’s commitment to maintaining high-interest rates for an extended period to combat inflation could slow down the economy and reduce corporate profit margins.

Adding to the unease is the looming specter of a government shutdown, with the Oct. 1 deadline fast approaching. Treasury yields, across various maturities, remain perched at levels unseen for over a decade.

Minneapolis Fed President Neel Kashkari took on a hawkish tone on Tuesday, suggesting a 40% likelihood of a scenario in which the Fed would need to implement significant rate hikes to counteract inflationary pressures.

Cues From Tuesday’s Trading:

The S&P 500 fell 1%, hitting its lowest level since June 8. The Dow dipped 0.9%, falling to the lows of July 10.

The tech-heavy Nasdaq 100 tumbled 1.1%, while the Russell 2000 fell 0.6%.

US Index Performance On Tuesday

Tuesday’s Trading In Major US Equity ETFs

• The SPDR S&P 500 ETF Trust SPY was 1.1% lower to $427.55
• The SPDR Dow Jones Industrial Average ETF DIA fell 0.9% to $337 
• The Invesco QQQ Trust QQQ fell 1.1% to $355.52, according to Benzinga Pro data.

Looking at S&P 500’s sector ETFs:

• The Energy Select Sector SPDR Fund XLE fell the least, down 0.1%
• The Utilities Select Sector SPDR Fund XLU and the Real Estate Select Sector SPDR Fund XLRE were the laggards, down 1.7% and 1.5%, respectively.

Upcoming Economic Data:

The Dallas Fed’s General Business Activity Index for the service sector in Texas experienced its first dip in four months in September, descending to -8.6, marking the lowest level since May.

Sales of new single-family houses contracted significantly to 8.7% in August, marking the most substantial decline since September 2022. The seasonally adjusted annualized rate for new home sales reached 675,000, below market expectations of 700,000 sales.

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Stocks In Focus:

• Cintas Corp. CTAS fell over 4%, the most among S&P 500 stocks, despite the company reported better-than-expected quarterly results and lifted outlook for Q4.
• United Natural Foods, Inc. UNFI tumbled 25% after missing revenue estimates.
• Roivant Sciences Ltd. ROIV, Immunovant’s largest shareholder with a 56.5% stake, rose 22% following the positive trial results of Immunovant’s antibody drug, IMVT-1402.
• Fisker Inc. FSR rose nearly 14% as the EV maker unveiled plans to ramp up deliveries to 300 vehicles per day in both the U.S. and European markets by year-end.
• Companies reporting after the close include Costco Wholesale Corp. COST and Progress Software Corp. PRGS.

Commodities, Bonds, Other Global Equity Markets:

Crude oil rose 0.7%, with a barrel of WTI-grade crude trading at $90. The United States Oil Fund ETF USO was 0.7% higher to $80.94.  

Treasury yields held steady, with the 10-year yield at 4.55% and the two-year yield up at 5.14%. The iShares 20+ Year Treasury Bond ETF TLT was 0.2% lower for the day. 

The dollar rose, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, up 0.3%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.4% lower to 1.0569.

European equity indices sold off during the session. The SPDR DJ Euro STOXX 50 ETF  FEZ fell 1.2%. 

Gold weakened 0.8% to $1,901/oz, while silver fell 0.8% to $21.03. Bitcoin BTC/USD was 0.2% lower to $26,242.

Staff writer Piero Cingari updated this report midday Tuesday. 

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