Dow Jones Dives On Janet Yellen Warning, Stocks Sell Off As Bond Yields Rise

The Dow Jones Industrial Average dived nearly 500 points midday Tuesday as stocks sold off on Treasury Secretary Janet Yellen’s default risk warning and bond yields rose.


The Nasdaq sank 2.6%, the S&P 500 shed 1.8% and the Dow Jones industrials lost 1.3% in the stock market today. Small caps tracked by the Russell 2000 were down 1.8%. Volume was higher on both major exchanges vs. the same time Monday.

Among exchange traded funds, Innovator IBD 50 (FFTY) slumped 5.5%, while the Nasdaq 100-tracking Invesco QQQ Trust (QQQ)  fell 2.2%. The IBD 50 ETF, which hit a new high Thursday, fell back below a 50.06 consolidation buy point and is testing its 50-day moving average.

Rising Treasury yields are putting pressure on rate-sensitive stocks such as technology. The yield on the 10-year note rose 7 basis points to 1.56%, the highest since June.

Default Risk Fears

Late Monday, Senate Republicans blocked a bill to fund the federal government until Dec. 3 and raise the debt ceiling. Federal Reserve Chairman Jerome Powell and Treasury Secretary Yellen are testifying before the Senate Banking Committee. Yellen warned Congress must raise the debt limit by Oct. 18.

U.S. Stock Market Today Overview

IndexSymbolPriceGain/Loss% Change
Dow Jones(0DJIA)34413.14-456.23-1.31
S&P 500(0S&P5)4361.69-81.42-1.83
Nasdaq(0NDQC )14586.89-383.08-2.56
Russell 2000 (IWM)222.34-4.10-1.81
IBD 50 (FFTY)47.64-2.76-5.48
Last Update: 11:38 AM ET 9/28/2021

“It is imperative that Congress swiftly addresses the debt limit. If it does not, America would default for the first time in history,” Yellen said in prepared remarks. “The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession.”

The U.S. economy continues to recover from the Covid-19 pandemic, which triggered nationwide lockdowns over a year ago. Most states had relaxed restrictions as vaccinations continued to roll out and cases decreased. But cases are rapidly rising again in some places, and mask mandates are returning in some states as the delta variant spreads.

Cumulative Covid-19 cases worldwide have topped 233 million, with nearly 4.8 million deaths, according to Worldometer. In the U.S., cases are approaching 44 million with more than 709,000 deaths.

Growth Stocks To Watch

Thor Industries (THO) cruised 9% higher in fast turnover to retake its 50-day and 200-day moving average lines. The RV maker delivered fiscal Q4 earnings and revenue that topped Wall Street targets. Shares have been consolidating since May.

Over in the IBD 50, InMode (IMND), SiTime (SITM) and Global e-Online (GLBE) dived more than 10% each in heavy volume. InMode and SiTime are holding above their 50-day lines, but Global e-Online breached support.

Sprout Social (SPT), Asana (ASAN) and Snap (SNAP) were among IBD 50 stocks down more than 7% apiece. Snap cleared an 80.95 flat-base buy point on Friday, but has now triggered the 7%-8% loss-cutting sell rule from the entry.

Covid-19 vaccine maker Moderna (MRNA) dropped nearly 7% in twice normal trade to tumble below its 50-day line for the first time since May. The biotech’s stock has shaped a cup with handle, but losses this week have roiled the pattern.

IBD 50 financials were among the better performers, relatively speaking, boosted by higher bond yields. Western Alliance Bancorp (WAL) climbed 0.3%, moving to within 2% of a 109.94 entry. Jefferies Financial (JEF) gave up 0.3% and Stifel Financial (SF) fell 1.2%.

Dow Jones Movers (CRM) and Microsoft (MSFT), down more than 3% each, were the biggest blue chip losers.

Salesforce fell back below a 275.32 buy point of a cup with handle it had cleared on Thursday. The stock hasn’t triggered a sell signal.

Microsoft gapped down and fell below its 50-day line. It also undercut the bottom of a six-week flat base, but the pattern is still intact and remains well within flat-base range. Microsoft is an IBD Leaderboard and IBD Long-Term Leader stock.

Apple (AAPL), Home Depot (HD), Boeing (BA) and Disney (DIS) gave up nearly 2% apiece.

Home Depot has slipped under a 338.65 buy point of a five-week flat base, which it had climbed past on Monday. The stock is holding up well above its 50-day line.

Follow Nancy Gondo on Twitter at @IBD_NGondo


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