Higher yields on relatively safer assets — such U.S. Treasurys — can also lure investors out of stocks and into debt and spark a broader rotation across asset classes. The benchmark 10-year Treasury note, a barometer for financial instruments ranging from mortgage rates to corporate bond rates, has climbed about 20 basis points since last Monday. The benchmark rate also hit its highest level in more than seven years in the previous session.
“The yield curve and growth and value are dominating the tape. With growth selling off, I would highlight a lot of stuff is starting to get very oversold,” said Robert Sluymer, technical strategist at Fundstrat. “A lot of stuff is oversold. As we roll through the week, I think the market should stabilize.”
If the sell-off continures, however, the 2,800 will be a key level to watch for investors, said Frank Cappelleri, executive director at Instinet.
“It’s a round number. It was also a key point to move through,” Cappelleri said. “When we broke above it, the patterns signaled a move to 3,000. If we move below that on a closing basis, that target is nullified.”
The S&P 500 is down more than 3 percent since last Monday. October, though positive for stocks on average, is famous for market crashes in 1929 and 1987, a 554-point Dow drop in 1997, sell-offs in 1978 and 1979 and the meltdown in 2008 after Congress rejected the bank bailout bill.
The decline in the S&P 500 follows a correction in the small-cap Russell 2000, which remains more than 8 percent off its 52-week high.
WATCH: A selloff with no fear