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Powell Sparks Interest Rate Jitters That Send Stocks Tumbling | Stock News & Stock Market Analysis

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.

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The 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.


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Health care, rail, auto parts and gold stocks also were in the bottom of today’s industry performance table.

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