Wall Street Slumps On Interest Rate Fears

Wall Street stocks fell sharply on Tuesday on worries about higher interest rates and disappointment over corporate earnings that have not met lofty expectations.

The Dow Jones shed 1.7 percent to 20,024.

The S&P 500 fell 1.3 percent to 2,634, while the Nasdaq dropped 1.7 percent to 7,007.

US stocks had begun the session mildly positive but began falling soon after the yield on the 10-year US Treasury bond hit 3.0 percent for the first time in more than four years.

The Federal Reserve has been gradually raising interest rates amid an improving US economy and expectations for steeper inflation. Investors fear that higher yields are a signal the central bank will need to hike interest rates more quickly than currently forecast.

Adding to the downward trend were some ugly moves lower by prominent companies following earnings, including Google parent Alphabet, which sank 4.5 percent on worries about higher costs even as quarterly earnings soared more than 70 percent to US$9.4 billion.

Alphabet's woes appeared to rub off on other large technology shares, with Amazon falling 3.8 percent, Facebook 3.7 percent and Microsoft 2.3 percent. All three companies report results later this week.

"Investors are looking for companies to not only meet expectations but they also want positive remarks out of management," said Shawn Cruz, manager of trading product and business strategy at TD Ameritrade.

"The bar is set pretty high," he said. "There's a lot of growth and some pretty high valuations priced in right now."

In the Dow, Caterpillar shares sank 6.4 percent after a conference call in which executives signalled that the company's first quarter would be its peak for 2018, denting hopes of higher profits down the road.

Caterpillar had opened the session sharply higher after scoring a huge jump in first-quarter profits and upgrading its full-year forecast.

3M was another big loser in the Dow, falling 6.8 percent after it lowered its full-year forecast and disclosed a US$897 million charge connected to settling a lawsuit with the state of Minnesota over the release of chemicals that allegedly polluted drinking water. (AFP)