Investors are selling US stocks out of fear

Investors are selling US stocks out of fear of a dwindling flood of money from the Fed and rising interest rates. Disappointing economic data also hit their mood on Tuesday. At the moment everything seems to be falling over the stock exchanges at once: possible tax hikes, rising inflation, the spread of the delta variant, said Ken Mahoney, head of wealth manager Mahoney. The US standard value index Dow Jones closed 1.6 percent lower to 34,299 points. The technology-heavy Nasdaq was down 2.8 percent to 14,546 points. The broad S&P 500 lost two percent to 4,352 points. According to experts, rising inflation and higher interest rates will devalue future profits of high-growth technology companies. Investors also sold US Treasuries, pushing the yield on trend-setting ten-year US bonds to a three-and-a-half-month high of plus 1.567 percent. This would make bonds a competition for stocks again, added stock market expert Mahoney. "That was not an issue for investors in the past few years." Federal Reserve Chairman Jerome Powell's latest statements signaled growing nervousness about inflation, said economist Sarah Hewin of Bank Standard Chartered. Investors feared that the temporary price-driving factors would develop into permanent ones. Stockbrokers assume that the Fed will raise interest rates as early as 2022. This lifted the dollar index, which reflects the exchange rate to major currencies, at times to an eleven-month high of 93.806 points. At the same time, the decline in US consumer confidence to its lowest level since February dampened corporate earnings prospects. Private consumption is considered to be the mainstay of the world's largest economy. Another negative factor for the mood is the imbalance of the real estate company China Evergrande and the energy crisis in the People's Republic, said Gianclaudio Torlizzi, partner in the consulting firm T-Commodity. Due to a shortage of coal and to reduce emissions, the Beijing government is forcing companies to cut production. According to experts, this fueled fears of a weakening of the global upswing. The dispute over raising the US debt ceiling was also a headache for some stockbrokers. If Congress does not decide on such a step by Thursday, there is a threat of a government shutdown from Friday, the closure of numerous authorities. So far, the bickering has been viewed as a political skirmish, said Jason Pride, chief investor at asset manager Glenmede. But if this deadline expires and no agreement is found by the third week of October, the topic will determine the course. According to experts, the US could then become insolvent.