Rising bond yields trigger huge losses on Wall Street.
U.S. stocks plunged on Wednesday, putting the S&P 500 Index (NYSEARCA:SPY) on track for its longest losing streak in two years as rising bond yields continued to weigh on investor sentiment.
All of Wall Street’s major indices headed for losses. The large-cap S&P 500 fell 3.3% to 2,785.68, with all 11 primary sectors finishing lower. Information technology, industrials, energy and discretionary shares were among the hardest hit.
The Dow Jones Industrial Average (NYSEARCA:DIA) plunged 823.90 points, or 3.1%, to 25,606.67. Nike Inc. and Boeing Co were among the biggest decliners.
Plunging tech shares weighed on the Nasdaq Composite Index (NYSEARCA:QQQ), which suffered the biggest percentage drop. The gauge closed down 4.1% at 7,422.05..
A measure of implied volatility known as the CBOE VIX (NYSEARCA:VXX) traded at its highest level in six months as investors shifted to risk-off mode. The so-called “fear index” reached a high of 21.97. It would eventually settle at 21.77, having gained 36.5%.
In commodities, energy prices were down across the board on Wednesday after the International Monetary Fund (IMF) lowered its outlook on global growth. U.S. West Texas Intermediate (WTI) futures fell $1.51, or 2%, to $73.45 a barrel. ICE Brent crude declined $1.49, or 1.8%, to $83.51 a barrel.
The Final Word: Volatility has returned with a vengeance. There’s strong reason to believe that this trend will continue as U.S. government bond yields continue rising on anticipation of tighter monetary policy.