Major Concerns as U.S. 10-Year Yields Test 3%

Trader Michael Milano works on the floor of the New York Stock Exchange Monday

Trader Michael Milano works on the floor of the New York Stock Exchange Monday. Richard Drew — The Associated Press

Gold prices also came under downward pressure from an improvement in the geopolitical environment, with the U.S. Treasury Secretary cautiously optimistic on his negotiations with China, North Korea freezing its nuclear testing, and Washington extending its deadline for sanctions against Russia's Rusal, said OCBC analyst Barnabas Gan. Bond prices continue to fall and the yield on the 10-year Treasury note is getting close to 3 percent, a milestone it hasn't reached since January 2014.

The two-year yield touched 2.500 percent, which was last seen in September 2008 before subsiding to 2.487 percent, up 1 basis point on the day. Eastern time. It was up as much as 13 points earlier. The Dow Jones industrial average fell 14.25 points, or 0.1 percent, to 24,448.69.

Autocatalyst metal palladium was down another 1 percent at $968.25 an ounce, having plunged 5 percent on Monday after the USA gave American customers of Russia's biggest aluminium producer Rusal more time to comply with sanctions. The Russell 2000 index of smaller-company stocks declined 0.1 per cent, to 1,562.12.

Google's parent company, fell 4.8 percent to $1,021.50. It reported strong digital ad sales and an accounting adjustment. Hong Kong's Hang Seng added 1.4 percent to 30,661.56, while the Shanghai Composite jumped almost 2.0 percent to 3,128.93, recouping losses from the previous day.

For example, former Fed Chair Janet Yellen has asserted that the USA economy will be a 1 percent real rate economy in the medium term, and the day that is the case then a 3 percent neutral rate will come immediately in play.

INDUSTRIAL WEAKNESS: 3M, which makes Post-it notes and industrial coatings and ceramics, shed 8.3 percent to $197.92 after it cut its annual forecast. Defense contractor Lockheed Martin (LMT) sank 6.1 percent. Chemical companies and other materials makers could also see their profits affected as oil prices and other expenses rise.

Bond prices slipped again Tuesday. The yield on the 10-year Treasury note continued to trade at four-year highs as it rose to 2.98 percent from 2.96 percent late Friday.

Low interest rates have played an important role in the economic recovery of the last decade, and the yield on the 10-year note is a benchmark for many kinds of interest rates including mortgages. The Federal Reserve has pointed to raising inflation since the start of the year, while companies including Kimberly-Clark and Whirlpool warned earlier Tuesday of the same trend.

Yields likely drew support from strong consumer confidence and home pricing data released on Tuesday. But the stock gave up those gains and finished with a loss of 6.2 percent at $144.44. In the technology industry, electronics manufacturer Sanmina-ICU jumped 18.1 percent to $32.70.

As rates rise in the US, global investors may be shifting cash to take advantage of higher returns, affecting trillions of dollars' worth of assets in markets around the world. The euro fell to $1.2220 from $1.2233.

Benchmark U.S. crude oil shed 1.4 percent to $67.70 a barrel in NY. Brent crude, used to price worldwide oils, gained 8 cents to $74.79 per barrel in London.

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