New York – Wall Street plunged Tuesday as investors, driving the Dow Jones industrial average down nearly 130 points, grappled with a seemingly relentless rise in bond yields.
It was a fitful trading session that saw stocks tumble, claw their way back and then plummet again when the yield on the 10-year Treasury note soared to a five-year high of 5.27 percent. The climb in bond yields exacerbated jitters about mortgage rates, which could hurt the sluggish housing market, and about the Federal Reserve hiking interest rates, which would slow down corporate dealmaking.
Surging takeover activity had helped boost stocks to record levels until a week ago, when the benchmark 10-year Treasury note’s yield passed 5 percent, unnerving stock investors and triggering a sell-off.
“It’s partially an excuse to take profits, but there are also some legitimate concerns that if bond yields get high enough, they will present an attractive alternative to stocks, and that higher interest rates will reduce private-equity activity,” said Edward Yardeni, president of Yardeni Research Inc.
The rise in Treasury yields Tuesday was stoked by a tepid reaction to the government’s auction of $8 billion in new 10-year notes and further aggravated by confounding comments from former Federal Reserve Chairman Alan Green span, who said he is not worried about foreign governments selling U.S. Treasury holdings but added that yields will likely rise in the future.
The Dow Jones industrial average fell 129.95, or 0.97 percent, to 13,295.01. The blue-chip index is 381 points, or 2.8 percent, below its record close of 13,676.32, reached June 4.
The broader stock indexes also declined. The Standard & Poor’s 500 index fell 16.12, or 1.07 percent, to 1,493.00, while the Nasdaq composite index dropped 22.38, or 0.87 percent, to 2,549.77.
According to, the average 30-year fixed-rate mortgage was at 6.33 percent Tuesday, up from 6.07 percent a week ago.
