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NEW YORK, Oct 3 – The S&P 500 index closed at its lowest level since June 1 on Tuesday as economic data underscored the view the Federal Reserve may need to keep interest rates high.

The Dow turned negative for the year for the first time since June and ended at its lowest level since May 31. The Nasdaq also closed at its lowest since May 31.

Data showed US job openings unexpectedly increased in August, fueling worries about a tight labor market ahead of Friday’s key US monthly jobs report.

Investors continue to closely watch benchmark Treasury yields, which hit 16-year highs on Tuesday.

“The scenario that most investors were assuming is the Fed would need to ultimately cut short-term rates, and we would return to a favorable interest rate environment,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

“But investors are seeing a different scenario now – higher rates for longer.”

Higher borrowing costs are a negative for businesses and consumers.

All but one S&P 500 sector – utilities – were lower on the day, led by declines in consumer discretionary and technology. Growth companies tend to be among the hardest hit by rising yields.

The Dow Jones Industrial Average fell 430.97 points, or 1.29%, to 33,002.38, the S&P 500 lost 58.94 points, or 1.37%, at 4,229.45 and the Nasdaq Composite dropped 248.31 points, or 1.87%, to 13,059.47.

The CBOE volatility index, Wall Street’s “fear gauge,” hit its highest close since May 24.

Atlanta Fed President Raphael Bostic said there is no urgency for the central bank to raise its policy rate again, but it will likely be “a long time” before rate cuts are appropriate. Cleveland Fed President Loretta Mester said she is open to raising rates again, potentially at the bank’s next meeting.

Shares of Amazon.com (AMZN) and Microsoft (MSFT) dropped after Reuters reported British media regulator Ofcom will push for an antitrust investigation into the companies’ dominance of the UK cloud computing market.

Investors are getting ready for US companies in the coming weeks to begin reporting on the last quarter, with some hoping the results could provide some positive news again for the market.

While the Dow is down 0.4% for the year, the Nasdaq remains up about 25% since Dec. 31 after a rally driven by enthusiasm over artificial intelligence.

Volume on US exchanges was 11.16 billion shares, compared with the 10.57 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancers on the NYSE by a 5.61-to-1 ratio; on Nasdaq, a 3.52-to-1 ratio favored decliners.

The S&P 500 posted one new 52-week high and 63 new lows; the Nasdaq Composite recorded 15 new highs and 439 new lows.

(Reporting by Caroline Valetkevitch; additional reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Vinay Dwivedi, Maju Samuel, and Richard Chang)

Oct 3 – Global technology giants faced the biggest drop in their market capitalization in September, hit by a rise in US bond yields and waning enthusiasm over artificial intelligence (AI).

The market cap of Apple Inc (AAPL) shed about 9% to 2.67 trillion at the end of September, while Microsoft Corp (MSFT) and Alphabet Inc’s (GOOGL) market cap declined about 4% each to USD 2.3 trillion and USD 1.6 trillion, respectively.

US economic data released last month showed a tight labor market and a resilient economy, feeding concerns inflation levels would stay elevated and that the Federal Reserve would need to keep interest rates higher for an extended time to curb inflation.

Those worries pushed US 10-Treasury yields to hit a 16-year high last month, tarnishing the allure of riskier assets.

Tech stocks were particularly impacted, as the rise in Treasury yields, which are regarded as risk-free rates, diminished the value of the future cash flow of tech firms.

The market cap of Nvidia Corp, which benefitted from a boom in AI earlier this year, dropped nearly 12% to USD 1.07 trillion. Still, the company’s market cap has risen almost 200% this year.

Still, Goldman Sachs was optimistic about the outlook for mega-cap stocks, saying the consensus sales and earnings expectations for the largest US tech stocks have been upgraded since the start of August.

“The divergence between falling valuations and improving fundamentals represents an opportunity for investors: On a growth-adjusted basis, the mega caps trade at the largest discount to the median S&P 500 stock in over six years,” it said.

On the other hand, Exxon Mobil Corp (XOM) and UnitedHealth Group Inc (UNH) climbed about 6% each to USD 470.7 billion and USD 467 billion, respectively.

(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Bernadette Baum)

NEW YORK, Oct 2 – The S&P 500 ended nearly flat on Monday with utilities falling sharply and investors weighing the likelihood the Federal Reserve will need to hold interest rates higher for longer.

The Nasdaq rose, and shares of Nvidia (NVDA) gained 2.9% after Goldman Sachs added the chipmaker to its conviction list of top stock picks.

Fed Governor Michelle Bowman said she remains willing to support another increase in the central bank’s policy interest rate at a future meeting if upcoming data shows progress on inflation is stalling or proceeding too slowly.

The US central bank said last month it may hike rates again as it struggles to bring inflation closer to its 2% annual target.

“We ended September with a market that was enveloped by uncertainty,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina. All three major indexes posted losses for September and the last quarter.

“Coming into this month, it’s a market that needs confirmation that earnings are working their way higher. And, what’s crucial for the market is to ascertain where the Fed is headed,” she said.

Investors continue to keep a close eye on rising Treasury yields, she said, but Monday’s advance in yields was tied to an agreement to avert a partial US government shutdown, which reduced demand for the debt before this week’s key jobs data.

Rate-sensitive utilities was the day’s worst-performing S&P sector, falling 4.7% in its biggest one-day percentage decline since April 2020.

Energy also fell sharply along with lower oil prices, while technology was up 1.3%.

The Dow Jones Industrial Average fell 74.15 points, or 0.22%, to 33,433.35, the S&P 500 gained 0.34 points, or 0.01%, at 4,288.39 and the Nasdaq Composite added 88.45 points, or 0.67%, at 13,307.77.

Tesla (TSLA) shares ended up 0.6% even as the electric vehicle maker missed market estimates for third-quarter deliveries.

Economic data showed US factory activity decreased at a shallower-than-expected pace in September, while US construction spending increased in August. Investors anxiously await the monthly US jobs report due on Friday.

S&P 500 companies begin to report third-quarter results later this month, with analysts expecting earnings to have risen 1.6% from the year-ago quarter after falling 2.8% in the second quarter, according LSEG IBES data Friday.

Among S&P utilities, shares of NextEra Energy (NEE) fell 9% and hit their lowest level in about 3-1/2 years.

Volume on US exchanges was 10.84 billion shares, compared with the 10.49 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancers on the NYSE by a 4.61-to-1 ratio; on Nasdaq, a 2.43-to-1 ratio favored decliners.

The S&P 500 posted two new 52-week highs and 52 new lows; the Nasdaq Composite recorded 24 new highs and 327 new lows.

(Reporting by Caroline Valetkevitch in New York; additional reporting by Shubham Batra and Shashwat Chauhan in Bengaluru; Editing by Vinay Dwivedi, Maju Samuel, and Richard Chang)

NEW YORK, Oct 2 – Strong upcoming earnings results could reverse the decline in mega-cap technology and growth stocks, which have been hammered by the rise in Treasury yields and are trading at their cheapest levels in six years by one measure, according to Goldman Sachs strategists.

The so-called Magnificent Seven group of megacap stocks -Apple, Microsoft, Amazon.com, Alphabet, Nvidia, Tesla, and Meta Platforms – have fallen 7% over the last two months, compared with a 3% decline in the broad S&P 500, as Treasury yields jumped more than 60 basis points to 16-year highs.

Those declines have pushed mega-cap forward price-to-earnings ratios down by a collective 20% over the last two months, leaving them trading at their largest discount to the market based on long-term growth since January 2017, Goldman Sachs said in a note dated Oct. 1. At the same time, the group is expected to post sales growth of 11% in the third quarter, compared with a 1% improvement for the S&P 500, the firm noted.

The mega caps in aggregate have beaten consensus sales growth expectations 81% of the time and have outperformed in two-thirds of earnings seasons since the fourth quarter of 2016, Goldman’s strategists said.

“The divergence between falling valuations and improving fundamentals represents an opportunity for investors,” they wrote.

The bullish call on tech stocks comes as investor sentiment for equities overall has flatlined, which historically has been a contrarian indicator of more gains ahead, Savita Subramanian, equity and quant strategist at BofA Global Research, wrote in a note Monday.

The average recommended allocation to equities in balanced funds remained unchanged at 53% in September, below the benchmark of 60%, Subramanian noted. Falling sentiment has historically been a signal of broad gains over the following 12 months, she noted.

The S&P 500 has dropped nearly 5% over the last 10 trading days but remains slightly more than 11% up since the start of the year.

“We expect the S&P 500 to rally into year-end, with more upside in the equal-weighted index,” Subramanian wrote.

(Reporting by David Randall; Editing by Ira Iosebashvili and Mark Potter)