Wall Street’s three major indexes fell approximately 1% on Monday, as rising Treasury yields reflected reduced expectations for Federal Reserve interest-rate cuts amid concerns over the impact of Middle East conflicts on oil prices.
Traders recalibrated their forecasts following a stronger-than-expected jobs report from Friday, pulling back on predictions for a 50-basis-point rate cut in November.
Currently, they are pricing in an 86% likelihood of a 25-basis-point cut, with a roughly 14% chance the Fed won’t cut rates at all, according to the CME’s FedWatch tool.
This shift in sentiment caused U.S. Treasury yields to rally, with the yield on benchmark 10-year notes surpassing 4% for the first time in two months.
In addition to economic data, investors are preparing for a new hurricane, Milton, expected to strike the U.S. this week, and ongoing relief efforts following Hurricane Helene, which resulted in over 200 fatalities across six states.
A U.S. judge’s order requiring Google to revamp its mobile-app business further dampened market sentiment, contributing to declines in tech stocks like Amazon and Apple.
“It’s a combination of factors—the jobs report, potential hurricane damage, elevated energy prices, and negative news surrounding major tech companies,” said Michael James, managing director of equity trading at Wedbush Securities. He noted that the Middle East conflict is also a growing concern for investors.
The Dow Jones Industrial Average dropped 398.51 points, or 0.94%, closing at 41,954.24. The S&P 500 fell by 55.13 points, or 0.96%, to 5,695.94, while the Nasdaq Composite lost 213.94 points, or 1.18%, finishing at 17,923.90. The CBOE Volatility Index, a measure of market fear, increased by 3.4 points, reaching its highest level since August 8.
Among the S&P 500 sectors, only energy saw gains, rising 0.4% due to concerns over Middle East supply disruptions, while utilities lagged behind, falling 2.3%. Apple’s stock dropped 2.3% after a downgrade, and Amazon fell 3% following negative analyst commentary.
Generac Holdings emerged as a significant gainer, rising 8.52% as investors anticipated increased demand for backup generators due to the approaching hurricane. Meanwhile, Pfizer shares climbed 2% following news of activist investor Starboard Value taking a $1 billion stake in the company.
Overall, declining issues outnumbered advancers significantly, with 11.39 billion shares changing hands on U.S. exchanges, below the 20-session average of 12.06 billion.
