S&P 500 and Dow plunge for third day in a row

The Dow Jones Industrial Average fell 292 points, or 0.7%, for the third straight day, driven by high Treasury yields and persistently high interest rates. The S&P 500 and Nasdaq Composite also fell, falling 0.6% and 1%, respectively, all extending losses into the third day.

On Wednesday, the yield on the benchmark 10-year Treasury note reached above 4.25%, its highest level since July. This increase is a mix of strong economic statistics and rising deficit concerns that appear to be masking the Fed's recent half-percentage point rate cut. The market is unsettled, largely because it was expected that the Fed might be less aggressive in future rate cuts than in the past and predicted further rate cuts before the end of the year.

Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management, added: “It's all about the pressure from higher rates.” The market is reassessing the likelihood of an aggressive Fed rate cut in the near term. Some parts of the economy have not yet realized that they are in a new regime of higher interest rates, but the longer this continues, the more parts of the economy will have to adjust. The economy is misaligned.

This came as other core stocks like Coca-Cola (KO, Financial) and Tesla (TSLA, Financial) fell about 2% and 1%, respectively, while Coca-Cola announced it beat third-quarter earnings estimates. Tesla's earnings release follows the bell ringing, sending everyone into a frenzy in a volatile stock market. The current market environment points to several risks and concerns, including a possible recession and a correction of excessive large-cap dominated segments.

This article first appeared on GuruFocus.