The Dow Jones Industrial Average, on the doorstep of 27,000 just days earlier, abruptly fell below 26,000 yesterday afternoon in a blaze of selling engendered by rising Treasury note and bond yields. Specifically, after days of moderate profit taking, on those rate shifts, but no wholesale unloading of equities, the situation changed yesterday. Perhaps it was the report earlier in the day that core producer (or wholesale) price inflation had jumped by 0.4% in September--the largest one-month increase since January--that set off the alarms. Or it might have been the further rise in note yields, to 3.23%, on the 10-year Treasury, that did it.

Whatever the case, the equity market, which had been falling steadily for days, but generally in some moderation, really took it on the chin yesterday afternoon. Specifically, the Dow off all morning and into the early afternoon, with declines of 300 points, or so, nearly doubled that drop after 2:00 PM (EDT) and plunged further, thereafter. In all, that composite would push to an afternoon decline of more than 3%. Worse still was the NASDAQ, which shed more than 200 points, or about 3.5% in that late swoon. Most groups were affected, although the food processors, under pressure throughout the year, managed to avoid the worst declines.

But the most severe setbacks were suffered by the technology stocks on fears about trade and valuations. The S&P 500, meantime, fell for a fifth day in succession, for the first time since late 2016. That index declined to below its 50-day moving average in the process. For the month to date, the tech-laden NASDAQ has shed more than 7%. As to rates, the Treasury is now at its highest level since 2011. In addition to rate fears, there also are concerns about tariffs and trade with China. At this time, there appears to be no end in sight for that worsening global standoff.

As to recent economic news, while the business expansion continues to roll along, with last week's data on manufacturing activity, the non-manufacturing sector, employment, and unemployment all making for generally good reading, the latest data on the Producer Price Index provided food for thought. Here, the headline inflation increase of 0.2% was not worrisome, but the core figure--that is excluding the volatile food and energy components--which showed a gain of 0.4%, was an issue, as it was the largest increase in that category since last January.

Meantime, the downturn continued into and through the final hour, with the Dow's loss surpassing 800 points as the close neared, with the other indexes tumbling in kind. Breaking things down, all 10 of the major equity sectors fell, with declines of greater than 2% in the materials, consumer cyclical, energy, financial, industrials, and technology sectors. Only the telecom and utility areas, with nominal setbacks, escaped the market's full wrath. All told, losing stocks overwhelmed gaining issues by some seven-to-one on the Big Board, There was simply no place for the bears to hide on this warm early autumn day in New York.

Looking out to a new day now, and following the massive selloff in New York, we see that stocks in Asia were off sharply in overnight dealings, while in Europe, the leading bourses are now tumbling. Also, oil prices are down notably so far this morning; Treasury note yields, which edged up to 3.23% yesterday, are at 3.17% this morning. And after all the red ink yesterday, the U.S. equity futures are showing early steep losses. Finally, after yesterday's dramatic action, we would not be surprised to see the equity market to again show elevated levels of volatility throughout the session. Stay tuned.

– Harvey S. Katz, CFA

 At the time of this article’s writing, the author did not have positions in any of the companies mentioned.