US stocks forecast: Wall Street's trader's fears outstrip greed, for now

Wall Street stocks were ending the day deeply in the red as investors moved away from risk as US Treasury yields rallied over deepening concerns for persistent inflation. In the background, but moving to the fore, traders also have started to position for risks of a contentious debt ceiling negotiation in Washington failing to find a compromise in time. Additionally, a Conference Board report showed consumer confidence weakened unexpectedly in September to the lowest level since February.

All three major US stock indexes were crippled by some 2% or more. The S&P 500 index and the Nasdaq Composite index were on track for their largest monthly declines since September 2020. The tech sector was the worst off. Unofficially, the Dow Jones Industrial Average fell 565.16 points, or 1.62%, to 34,304.21, the S&P 500 dropped 90.34 points, or 2.03%, to 4,352.77 and the Nasdaq Composite shed 420.41 points, or 2.81%, to 14,549.56.

Stalemate on US debt ceiling negotiations

• US debt ceiling debacle and mixed messages weigh on Wall Street

US Treasury yields moved up to their highest levels since June as investors priced for the US Federal Reserve's timeline to tightening its monetary policy sooner than expected. This was sparked by comments from Treasury Secretary Janet Yellen who said she expected inflation to end 2021 near 4%.

Meanwhile, as Senate Republicans appeared set to strike down Democrats' efforts to extend the government's borrowing authority and avoid a potential US credit default, her stark warning to US lawmakers over the possibility of them being able to avert a government shutdown sent shivers down the spine of Wall Street as well.

She said the nation is moving closer to exhausting its borrowing capabilities which could cause "serious harm" to the economy. In the same vein, JP Morgan Chase  CEO Jamie Dimon said his bank has already begun preparing for potential US credit default as debt limit talks go to the wire. ''Failure to address US debt limits in time would be ''potentially catastrophic,'' he told Reuters. 

Tuesday's US stock market performers

As for performers, according to Reuters, 'among the 11 major sectors of the S&P 500, all but energy SPN ended red, with tech and communications services suffering the steepest percentage losses. Apple Inc AAPL, Microsoft Corp MSFT, Amazon.com Inc AMZN and Alphabet Inc GOOG weighed the heaviest on the S&P and Nasdaq.''

Evergrande risks could support US stocks

Meanwhile, the Evergrande risks remain in theme. This could in turn help to support the US stock market as international investors look for a safer haven than APAC markets that could be exposed to contagion. The US is regarded as one of the safest guarded markets to any possible systemic risks of the companies default and China's property market meltdown. There are now growing fears that Evergrande’s potential collapse won’t be able to be contained as easily as many initially believed. While Evergrande has missed paying $83.5 million in interest to offshore bondholders last week and has a $47.5 million coupon payment due on Wednesday, markets remain on edge and await news on how this is going to play out. 

S&P 500 61.8% golden ratio under pressure