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Nasdaq Leads Wall Street Lower As Bond Yields Surge, Energy Crisis Rattles Markets

Rolling blackouts in China, record high energy prices in Europe and gas line-ups in Britain underscored a troubling power crisis that has Wall Street trading lower Tuesday.

U.S. stocks slumped lower Tuesday, with tech leading the declines, as government bond yields surged alongside commodity prices amid the extended energy crunch sweeping its way across the world.

A weaker-than-expected reading for September consumer confidence, which came in at a six-month low of 109.3, added to the market's early pessimism. 

Natural Gas prices hit fresh record highs in Europe, trading more than five times the level seen in north American markets, while U.K. Prime Minister Boris Johnson has put British troops on standby as the nation remains gripped by a shortage of gasoline that has left stations without fuel for a third consecutive day.

Henry Hub Remains the Center of Natural Gas Markets

China, meanwhile, remains hamstrung by rolling blackouts linked to a lack of coal, higher energy prices and tougher emissions standards that have slowed industrial profits for six consecutive months and affected as much as two-thirds of the manufacturing activity in the world's second largest economy.

The energy price surges have lead to an extended rally in crude markets, as well, which are also elevated by the lowest domestic supplies since 2018 and the disruption in Gulf drilling capacity brought by Hurricane Ida.

WTI futures for November delivery traded 89 cents higher on the session at $76.34 per barrel while Brent contracts for the same month, the global pricing benchmark, were up 71 cents at $80.24 per barrel, the highest since 2018.

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In the U.S., a poorly-received auction of $60 billion in 2-year notes yesterday -- which drew the weakest demand levels since 2008 amid a plunge in foreign buyers -- underscored the risked linked to debt ceiling negotiations and a pending government shutdown and sent yield surging to 18-month highs in overnight trading.

On Wall Street, the Dow Jones Industrial Average fell 450 points by late-morning, with oil and banking stocks providing only limited support, while the S&P 500 slumped 79 points.

The tech-focused Nasdaq Composite, which is more sensitive to interest rate increases, fell 380 points as Treasury bond yields surged, taking benchmark 10-year Treasury notes to a January 17 peak of 1.551% in early New York trading.

Those levels will surely be in focus as Federal Reserve Chairman Jerome Powell takes questions from the Senate Banking Committee Tuesday, particularly after noting in prepared remarks that inflation pressures and hiring challenges in the world's biggest economy may be "more enduring than anticipated".

Ford  (F) - Get Ford Motor Company Report shares were the standout pre-market gainer, rising 1.7% to $14.40 each after the carmaker unveiled plans to build four new U.S.-based manufacturing plants as it accelerates its transition into clean-energy vehicles.

Huntsman Corp  (HUN) - Get Huntsman Corporation Report shares were also impressive, rising 7% to $30.03 each following news that activist investor Starboard Value have built an 8.4% stake, valued at more than $500 million, in the chemicals producer.

Pfizer  (PFE) - Get Pfizer Inc. Report, meanwhile, was marked 1.6% lower after it submitted data from a late stage trial of its coronavirus vaccine on kids between the age of 5 and 11 to the U.S. Food & Drug Administration

Tesla  (TSLA) - Get Tesla Inc Report bucked the downmarket trend in tech, rising 0.15% after Piper Sandler analysts said the clean-energy carmaker's third quarter deliveries will be "the strongest ever", but gave back those gains to trade 1.3% lower on the session at $781.05 

In overseas markets, European stocks fell the most since July 19, with the Stoxx 600 down 2%, as power prices surged and tech stocks slumped. In Asia, a rebound in China stocks failed to lift the region-wide MSCI ex-Japan benchmark into the red, while cautious trading flows boosted the U.S. dollar index to a five week high of 93.65 against a basket of its global peers.