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Investing.com – The Dow slumped Thursday, following a rout in technology stocks as Treasury yields climbed to multi-year highs a day after the Federal Reserve delivered its biggest interest rate hike in more than two decades.
The Dow Jones Industrial Average slipped 3%, or 1,004 points, the Nasdaq fell 4.7%.
Big tech was led lower by a more than 5% slump in Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB), with Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT) not far behind as rising Treasury yields, the enemy of growth stocks like tech, jumped.
The 10-year Treasury yield briefly jumped to 3.1%, its highest level since November 2018, a day after the Fed delivered a 50 basis points increase.
“There had been some hope that as the 10-year Treasury yield approach 3% things might stabilize,” Chief Strategist at Spouting Rock Asset Management Rhys Williams told Investing.com in an interview on Thursday. “Over the last 15 years since the great financial crisis, economies have slowed once the rate on the 10-year Treasury crossed 3%. I think it’s a little bit disconcerting [that rates haven’t slowed], and that’s why the markets are reacting poorly to that,” Williams added.
The clear breakout above 3% will likely lead to a further climb in rates, likely putting growth stocks in the crosshairs for a while longer.
“The next objective for the 10-year Treasury yield would be about 3.25%. I think that’s the next reasonable point where where you could see yields reset a little bit and see things sort of normalized,” Chief Market Strategist David Keller at StockCharts.com told Investing.com in an interview earlier this week.
Fed Chairman Jerome Powell on Wednesday downplayed the prospect of a larger 75 basis points rate hike, but said further 50 basis points rate hikes were in consideration in the coming months, keeping investor bets on the year-end Fed funds rates intact.
“[W]e now see a third 50bp rate hike as likely at the July FOMC [and] 25bp for the balance of the year, bringing the fed funds rate at the end of 2022 to 2.625%,” Morgan Stanely said in a note.
