US markets slump on tech woes, debt default jitters

US stock markets ended sharply lower on Monday as investors dumped Big Tech and other growth stocks in the face of rising Treasury yields, while concerns about a potential US government debt default offered another reason for caution.

Apple, Microsoft, Amazon and Alphabet, the US stock market’s four most valuable companies, each dropped more than 2 percent.

Facebook, the fifth most valuable company, slumped after its app and its photo-sharing platform Instagram were down for thousands of users, according to outage tracking website

“For Big Tech, this is a short- to medium-term thing, part of a correction process. Rates were clearly too low, due in large part to central bank policies, and now as investors anticipate those policies getting clawed back, rates are moving closer to their real value,” said Jack Ablin, Chief Investment Officer at Cresset Wealth Advisors in Palm Beach, Florida.

US Treasury yields rose as investors fretted about the lack of a debt ceiling fix in the US Congress and looked ahead to the release this week of September employment data, which could pave the way for the tapering of Federal Reserve asset purchases.

President Joe Biden said he cannot guarantee the government will not breach its US$28.4 trillion debt limit unless Republicans join Democrats in voting to raise it, as the United States faces the risk of a historic default in just two weeks.

Recent data showing increased consumer spending, accelerated factory activity and elevated inflation growth have fueled bets that the Federal Reserve could start tightening its accommodative monetary policy sooner than expected.

Wall Street’s main indexes were battered in September, hit by worries including the fate of a massive infrastructure spending bill and the meltdown of heavily indebted China Evergrande Group.

The S&P 500 has now fallen about 5 percent from its record high close on September 2.

Spooking investors further, St. Louis Federal Reserve Bank President James Bullard warned that inflation could remain elevated for some time.

The Dow Jones Industrial Average fell 0.9 percent to end at 34,002, while the S&P 500 lost 1.3 percent to 4,300.

The Nasdaq Composite dropped 2.1 percent to 14,255.

US trade negotiator Katherine Tai pledged to begin unwinding some tariffs imposed by former President Donald Trump on goods from China, while pressing Beijing in “frank” talks in coming days over its failure to keep promises made in the Trump trade deal and end harmful industrial policies. (Reuters)