Stocks close lower as tech slips and bond yields jump

Stocks closed lower and bond yields jumped Tuesday as remarks by a Federal Reserve governor fueled expectations on Wall Street that the central bank is prepared to more aggressively raise interest rates and take other steps in a bid to tame surging inflation.

The S&P 500 fell 1.3% after shedding a modest early gain. The Dow Jones Industrial Average fell 0.8%, and the Nasdaq slid 2.3%.

The S&P 500 had its first loss in three days. It notched three straight weekly gains coming into this week, during which the market regained some of its footing after a skid in January and February as rising inflation, uncertainty over the Fed’s next interest rate policy moves and the war in Ukraine rattled Wall Street.

That recent market strength may be giving the Fed the leeway to raise interest rates more aggressively, said Zach Hill, head of portfolio management at Horizon Investments.

“Against that backdrop, things have obviously changed and the Fed is willing to ratchet up their hawkishness a bit,” Hill said.

The S&P 500 fell 57.52 points to 4,525.12. The Dow slid 280.70 points to 34,641.18, and the Nasdaq dropped 328.39 points to 14,204.17.

Smaller company stocks fell more than the broader market. The Russell 2000 lost 49.40 points, or 2.4%, to close at 2,046.04.

Weakness from big technology stocks weighed down the broader market the most. Companies in the sector, with their pricey valuations, tend to push the market higher or lower more forcefully. Chipmaker Qualcomm fell 5.4%.

Treasury yields jumped again as investors brace for more aggressive moves by the Fed to rein in the hottest inflation in 40 years. Fed Governor Lael Brainard said in a speech that it’s “of paramount importance” and that the central bank is set to keep raising short-term interest rates following its March hike, which was its first increase since 2018.

Traders are pricing in a nearly 78% probability the Fed will raise its key overnight rate by half a percentage point at its next meeting in May. That’s double the usual amount and something the Fed hasn’t done since 2000. That helped the yield on the two-year Treasury jump to 2.53% from 2.46%, its highest level since March 2019.