The stock indexes fell Tuesday after the first congressional testimony of new Fed Chairman Jerome Powell raised new worries that interest rates may climb more than expected.
XThe Nasdaq composite slid 1.2%, the S&P 500 1.3% and the Dow Jones industrial average 1.2%. The Russell 2000 and Dow transports skidded 1.3% and 2.3%, respectively, with the Russell falling below its 50-day moving average. The rate-sensitive Dow utilities average tumbled 1.7%.
Volume rose, an indication that institutional investors took Powell's remarks seriously and sold shares in massive quantities. Decliners beat advancers by 3-1 on the NYSE and by 13-5 on the Nasdaq.
Although Powell did not voice an urgency to quicken the pace of interest-rate hikes, investors heard a hawkish message that sent bond yields higher and stocks lower.
Wall Street's assumption had been that the Fed would stick with a plan for three increases this year of a quarter-point each. But odds for a fourth rate hike rose after Powell's testimony.
The yield on the 10-year Treasury note climbed 5 basis points to 2.91%, still near a four-year high.
The prospect of higher interest rates would normally cause financial stocks to climb. But the sector couldn't fend off sellers. The SPDR Financial ETF (XLF) fell 1%. Part of the sector's weakness was mortgage stocks, which fell about 2% as a group and face a headwind from higher interest rates.
Homebuilders and some building-related groups were among Tuesday's weakest. LGI Homes (LGIH) and Toll Bros. (TOL) reported better-than-expected earnings, but both sold off sharply. The industry has been flagging for more than a month after being one of the market's best in 2017.
Health care, rail, auto parts and gold stocks also were in the bottom of today's industry performance table.
RELATED:
Stocks Fall As Fed Chief Powell Sees Faster Growth, But Here's What Investors Missed
LGI Homes, Toll Bros. Top Earnings Views, But Stocks Tumble
What Is Inflation, And Why Does It Matter To The Fed — And You?
