Day Traders Diary

9/28/21

The major averages fell sharply on Tuesday, with tech names dragging down the broader markets as Treasury yields traded near three-month highs and lawmakers in Washington continued their budget stalemate. The Nasdaq Composite dropped 2.8% for its worst day since March and the S&P 500 shed 2%. The Dow Jones Industrial Average lost 568 points, or about 1.6%.

The 10-year Treasury yield continued its speedy climb on Tuesday, rising as high as 1.558% as investors bet the Fed would carry through on its promise to curb its emergency bond-buying stimulus as inflation jumps. The 10-year yield has reversed dramatically to the highest levels since June since the Fed signaled last week it would taper its $120 billion in monthly bond purchases "soon."

The 10-year rate was as low as 1.29% at one point last week and was as low as 1.13% as recently as August. The 30-year Treasury yield has also been on the move, topping 2%.

Facebook, Alphabet and Amazon shares lost more than 3%.Large chip stocks struggled, with Nvidia sliding more than 4%.

Also weighing on sentiment was a budget showdown in Washington. Senate Republicans blocked a House-passed bill Monday that would have funded the government into December and suspended the debt ceiling until December of 2022.

Congress must approve government funding by Friday to avoid a shutdown, and Treasury Secretary Janet Yellen warned Congress in a letter on Tuesday that lawmakers need to raise the debt limit by Oct. 18 to avoid a government default. President Biden's massive infrastructure plan also faces an uncertain future.

While tech stocks dragged down the broader market, sectors tied to the economic reopening outperformed and energy names saw a slight gain. Shares of Ford rose 1% after the company announced plans to build new production facilities in the U.S.

However, stocks closed near their lows of the day as the weakness in Big Tech appeared to overpower some of the reflation trade.

Federal Reserve Chair Jerome Powell told the Senate Banking Committee on Tuesday that inflation could persist longer-than-expected due to supply chain issues and reopening pressures.

The weakness on Tuesday extended the losses for the major indexes in September. The Nasdaq is down 4.2% month to date, while the S&P 500 and Dow are down 3.5% and 2.7%, respectively.

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