Stocks fell broadly on Tuesday, led by sharp drops in utilities and phone companies. U.S. government bond prices also slumped, and gold had its worst day in nearly three years.
Investors are nervous about the timing and the pace of any increase in the super-low interest rates controlled by the Federal Reserve, and comments from central bank officials recently have added to their jitters.
Stocks rose from the open, but the gains quickly faded and the selling spread across industries. By the end of trading, 10 of the 11 sectors of the Standard and Poor's 500 index were down. It was the second day of broad declines, a weak start to a new quarter after solid returns in recent months.
Bank stocks bucked the downward trend in the market and moved higher. Citigroup rose 1.5%. Higher interest rates will mean higher profits from lending for banks.
The Dow Jones industrial average fell 85.40 points, or 0.5%, to 18,168.45. The S&P 500 fell 10.71 points, or 0.5%, to 2,150.49. The Nasdaq composite fell 11.22 points, or 0.2%, to 5,289.66.
A big driver of the day's trading was rates, with investors closely watching the yield of the benchmark 10-year Treasury note, which has risen as the price of the note has dropped. The yield on Tuesday rose to 1.69%, up more than a tenth of a percentage point in less than a week.
As the yields have risen, investors who had poured money into steady dividend payers like phone and real estate companies and utilities as alternatives to bonds have been selling because bonds are becoming more attractive as a source of income. Utilities have fallen 7% since Sept. 22, after soaring 21% in the first six months of the year.
On Monday, a key manufacturing gauge in the U.S. showed surprising strength. Then an official at the Federal Reserve Bank of Cleveland, a "hawk" who believes the central bank should be raising rates, reiterated her position in a Bloomberg interview.
Investors are looking ahead to a report on job creation out Friday to better gauge how soon the Fed will act. The Fed is expected by most investors to wait until December to raise rates.
The price of gold dropped sharply as investors anticipated that rates would keep rising. Higher rates diminish the appeal of gold, which investors tend to favor when they fear that low rates will encourage inflation. Gold slumped $43, or 3.3%, to $1,269.70 an ounce.
Among stocks making news, Newell Brands rose 65 cents, or 1.2%, to $51.60 after announcing it would sell 10% of its businesses, including part of its outdoor segment and its consumer storage unit. The company owns Mr. Coffee, Paper Mate, Elmer's and other brands.
The U.S.-listed shares of Deutsche Bank rose 35 cents, or 2.7%, to $13.33. Germany's biggest bank has been under pressure since it revealed the U.S. Justice Department had proposed a $14-billion payment to settle an investigation into the bank's dealings in risky mortgage bonds. Its shares have been rising recently on a news report Friday that a lower fine was in the offing.
In overseas markets, Britain's FTSE 100 jumped 1.3%, just shy of its all-time high of 7,122, as the pound continues to sink after the country's prime minister gave a clear timetable on Sunday for exiting the European Union. The pound is now near a 31-year low of $1.2741. A weaker pound makes the products and services of FTSE-listed multinationals cheaper abroad, boosting earnings.
Germany's DAX was 1% higher while the CAC-40 in France rose 1.1%.
In other metals trading, silver fell $1.09, or 5.8%, to $17.78 an ounce and copper fell 3 cents to $2.17 a pound.
U.S. benchmark crude oil fell 12 cents to close at $48.69 a barrel. Brent crude, the international standard, slipped 2 cents to close at $50.87 a barrel in London. Wholesale gasoline rose 3 cents to $1.50 a gallon, heating oil was little changed at $1.55 a gallon and natural gas increased 4 cents to $2.963 per 1,000 cubic feet.
In currency markets, the euro slipped to $1.1197 from $1.1215 and the dollar rose to 102.81 yen from 101.57 yen.
2:20 p.m.: This article was updated after the close of markets.
10:15 a.m.: This article was updated with more recent market information.
7:35 a.m.: This article was updated with more recent market information.