The S&P marked its worst session since May, while the Nasdaq had its worst day since March. For the Dow Jones, it was only the worst drop since the sell-off last week.
“It’s a bit of a tantrum,” said Ed Yardeni, president of Yardeni Research.
The yield on 10-year Treasury bills, sensitive to inflation expectations, rose to 1.54% by the time of the closing bell. Bond yields and prices move in opposition.
“The supply side restrictions that are so central to inflation that we are seeing… in some cases they have worsened,” Powell told lawmakers during the hearing.
There was little reaction to the stock market at the time as the comments lived up to expectations, but Tuesday’s liquidation could still be about cutting, the Fed’s process of cutting back on monthly purchases.
Debate on the debt ceiling
Powell and Treasury Secretary Janet Yellen testified before Congress on Tuesday about the pandemic and the CARES Act.
“Deficits have been recorded in the Democratic and Republican administrations. It is important to recognize that,” Yellen said. “And that means paying the bills for these deficits is a shared responsibility and it shouldn’t be just one party’s responsibility.”
While policymakers are busy in Washington, American consumers are less and less confident. The Conference Board’s consumer confidence index fell for the third consecutive month in September “with the spread of the Delta variant continuing to dampen optimism,” said Lynn Franco, senior director of economic indicators at the Conference Board.
It’s not just stocks, bonds and the economy that make investors uncomfortable.
– CNN’s Matt Egan and Julia Horowitz contributed to this report.