Stocks fell on Tuesday as a jump in bond yields threatened a rising market by weighing on the U.S. consumer industry and undermining gains in technology stocks.
Traders also watched the oil market after President Donald Trump called off planned strikes on Iran, as well as recent pressure on chip stocks.
The S&P 500 fell 0.2%, while the Nasdaq Composite retreated 0.4%. Both benchmarks were on track for their third consecutive loss. The Dow Jones Industrial Average lost 107 points, or 0.2%.
The bond market has added a new edge to the rising market. The yield on 30-year government bonds hit 5.198% on Tuesday, the highest level in nearly 19 years. The move in rates comes after a series of reports last week showing inflation rebounding as the war in Iran pushed up oil prices, SEEbiz reports. Higher interest rates on things like credit cards and mortgages could limit spending. Meanwhile, rising interest rates could dampen long-term economic growth and expose the skyrocketing valuations seen recently in some chip stocks.
“There are ‘bond avengers’ on the scene right now,” said Will McGough, chief investment officer at Prime Capital Financial. “Everyone is wary of energy prices staying high, which could lead to slightly below-average inflation.”
Bond avengers are institutional investors who sell government bonds to signal their disapproval of inflationary US monetary policy.
McGough added that investors could send a message that the Federal Reserve is lagging behind the inflation average before Kevin Warsh is sworn in as Fed chairman on Friday.
“There’s this narrative that markets tend to test new Fed chairs,” McGough told CNBC. “If you believe the thread, you could have seen that the Bond Avengers had apparently tested it.”
