At 10:38 a.m. ET, the Dow Jones Industrial Average was down 361.68 points, or 1.04 per cent, at 34,507.69, the S&P 500 was down 64.66 points, or 1.46 per cent, at 4,378.45, and the Nasdaq Composite was down 321.51 points, or 2.15 per cent, at 14,648.46.
US consumer confidence unexpectedly fell to its lowest since February this month, as soaring COVID-19 infections intensified concerns about the economy’s near-term prospects.
The reading, coupled with a rising trade deficit and an expected decline in vehicle sales, brewed fresh concerns about the state of consumption in the country, which is a key driver of economic growth.
“What looks like slowing down of economic growth, yet the increase in the 10-year yield – that’s causing investors to say maybe we should be getting out of tech,” said Sam Stovall, chief investment strategist at CFRA Research in New York.
“Consumers continue to be worried by supply disruptions, the threat of higher inflation as well as the Delta variant, what kind of an impact that will have on their life and the economy.”
Fed Chair Jerome Powell had also flagged concerns over prolonged difficulties in a post-COVID economic reopening, and in a hearing before the US Senate Banking Committee said that even with the eventual tapering of stimulus, monetary policy would likely remain accommodative until mid-2022.
The two-year US Treasury yield surged to 18-month highs, weighing on shares of high-growth companies whose values are closely linked to future earnings.
Shares of Apple, Microsoft Corp, Amazon.com Inc and Google-parent Alphabet Inc dropped between 1.1 per cent and 3.5 per cent.
These stocks have benefited from the low-interest rate environment since the start of the pandemic.
Progress on U.S government funding negotiations was also in focus after a sharply divided US Senate failed on Monday to advance a measure to suspend the federal debt ceiling and avoid a partial government shutdown ahead of a Sept. 30 deadline.
Among other stocks, Ford Motor Co rose 1.2 per cent after the US automaker and its Korean battery partner SK Innovation said they would invest $11.4 billion to build an electric F-150 assembly plant and three battery plants in the United States.
Declining issues outnumbered advancers for a 4.34-to-1 ratio on the NYSE and for a 5.06-to-1 ratio on the Nasdaq.
The S&P index recorded 16 new 52-week highs and four new lows, while the Nasdaq recorded 32 new highs and 69 new lows.