Wall Street stocks tumbled on Tuesday, as concerns about the potentially damaging economic impact of the Omicron coronavirus variant and hawkish comments from the US central bank president swirled around markets.
The benchmark S&P 500 index fell 1.6%, erasing gains made on Monday. The tech-heavy Nasdaq Composite market share index also fell 1.4%.
In prepared remarks on Monday, Jay Powell, Chairman of the Federal Reserve, said the rising Covid-19 cases and the Omicron variant, “pose a downside risk to jobs and activity.” economy and increasing uncertainty over inflation”.
The move in markets was amplified Tuesday by a suggestion from Powell, in his testimony to Congress, that the US central bank may be ready to accelerate its monetary tightening program to combat inflation.
His comments helped push Treasury yields shorter, track interest rate expectations and lower yields on longer-dated Treasuries, which fluctuate with growth and inflation expectations. The spread between 5-year and 30-year Treasury yields narrowed the most since March 2020.
Yields on two-year Treasuries, which are particularly sensitive to interest rate expectations, rose 0.04 percentage points to 0.52 percent.
Earlier, Europe’s Stoxx 600 index closed 0.9% lower, after a volatile day of trading marked by worries about the potential for vaccine avoidance of the new variant. Hong Kong’s Hang Seng and Tokyo’s Nikkei 225 both fell 1.6 percent.
Read more about intraday market movements here.