Market Update: Dow Snaps Seven-Day Win Streak as Interest Rates Surge

U.S. stocks declined sharply on Tuesday after Home Depot reported disappointing quarterly sales and government bond yields rose to their highest level since 2011.

Stocks Sink

All of Wall Street’s major indexes booked losses, with the Dow Jones Industrial Average snapping a seven-day winning streak. The blue-chip index fell 193.00 points, or 0.8%, to close at 24,706.41. Twenty-six of 30 index members contributed to the decline.

Shares of Home Depot fell more than 1.6% after the home improvement retailer reported slower than expected revenue growth during the first quarter. The sales miss offset an otherwise positive quarter of earnings.

The broader S&P 500 Index declined 0.7% to 2,711.45, with ten of 11 primary sectors ending lower.

Meanwhile, the technology-heavy Nasdaq Composite Index slid 0.8% to finish at 7,351.63.

The CBOE Volatility Index, also known as the VIX, jumped to its highest level in a week. Wall Street’s preferred measure of investor anxiety rose more than 13% to 14.63. VIX trades on a scale of 1-100, where 20 represents the historic mean. The fear index recently settled below 13.00, its lowest since late January.

Bond Yields Surge

Appetite for stocks was challenged on Tuesday after U.S. government bond yields surged to fresh peaks.

The benchmark U.S. 10-year Treasury yield, which moves inversely to its price, jumped to 3.07%. That was the highest level since 2011.

Yields have been rising steadily as investors continue to dump their holdings of U.S. government debt. The sell-off in U.S. Treasuries began silently in the first half of 2017 and has intensified in recent months. The sharp rise has been accompanied by growing expectations the Federal Reserve will raise interest rates at a quicker pace in the second half of 2018.

As of Tuesday, traders were pricing in a higher probability of a fourth rate increase in December. CME’s Fed Fund futures prices point to at least two more adjustments in June and September of this year.

Growing rate-hike bets fueled strong demand for the U.S. dollar, which rose on Tuesday to its highest level in five months. The dollar index (DXY) climbed 0.7% to 93.26, boosting its one-month returns to 4.3%.

Cryptocurrency Markets Falls Below $400 Billion

The cryptocurrency market ran into resistance on Tuesday, with altcoins shouldering the bulk of the declines.

Digital currencies shed $14 billion in market cap, reaching a total of $394 billion, according to CoinMarketCap.

EOS was the biggest decliner in the top-ten, falling 8.2% to $13.20. Bitcoin cash fell 7% to $1,363.

Bitcoin fell 3% to $8,550 but its share of the total market rose slightly to $36.9%.

Digital currency exchange Upbit was vindicated on Tuesday after a South Korean accounting firm confirmed that the exchange did not falsify its records to deceive investors. Upbit was subjected to a raid late last week by South Korea’s financial watchdog in conjunction with local police forces.

People familiar with the probe say investigators were tipped off by an apparent liquidity shortfall at the exchange. At the time the raid took place, Upbit had enabled wallets for roughly 90 cryptocurrencies despite advertising a total of 130 digital assets.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi