Market Volatility: Schwab’s Quick Take

U.S. stocks fell Tuesday on persistent concerns over the debt ceiling, along with a continued increase in Treasury yields. The S&P 500 closed down 2%, the Nasdaq fell 2.8%, and the Russell 2000 fell 2.3%.

All equity sectors except Energy declined. Growth-oriented sectors struggled most, with Information Technology and Communication Services falling 3% and 2.8%, respectively. The relatively fast increase in yields over the past week has put pressure on higher-valuation sectors—namely, Information Technology, Communication Services, and Consumer Discretionary, which make up more than half of the S&P 500’s value by market cap. The Energy sector has fared relatively well, benefiting from the recent strength in oil and gas prices.

U.S. stocks: Stocks were already churning below the surface

Even before today’s selloff, more than 80% of the S&P 500’s constituent stocks had declined by at least 10% from their highs this year. Despite relatively little volatility at the index level, shifts at the sector level have been swift and frequent. The constant leadership reversals between growth-oriented sectors like Information Technology and Communication Services and value-oriented sectors like Energy and Financials have contributed to weakness.