The equity markets fell sharply on Wednesday, with the S&P 500 marking its largest daily decline since Feb. 8, and technology stocks led the losses as rising Treasury yields sent investors fleeing from risky assets.

The deepest one-day selloff in Wall Street stocks in eight months has investors using the market equivalent of a dirty word: “correction”.

With traders spooked by rising Treasury yields and fears of a deepening U.S.-China trade conflict, the benchmark S&P 500 index on Wednesday fell 3.29 percent, its worst one-day decline since February, bringing its loss to almost 5.0 percent since closing at a record high on Sept 20.

Many investors define a stock market correction as a fall of at least 10 percent from a high, often as a reaction to excessive gains.

Fears of a potential correction became more acute as the S&P 500 technology index fell 4.77 percent, the deepest one-session decline since 2011 for the sector behind much of the market’s gains in recent years.

The concern is how aggressively the Fed will raise interest rates, and whether the central bank will support markets the way it was seen to have done under previous Fed chairs. A stock market downturn hitting voters’ retirement savings would be inopportune ahead of midterm elections on November 6.

Whether the S&P 500 index slides into a prolonged downturn may hinge on what companies say about their outlooks when they report their quarterly results in coming weeks.

Look for S&P 500 earnings per share to surge 21 percent, year over year, in the September quarter and 20 percent in the December quarter, according to I/B/E/S data.

However, in 2019, deep corporate tax cuts that started in 2018 will be a year old, and companies are unlikely to repeat the same strong earnings growth they saw this year. Earnings repatriated from abroad this year as part of the tax overhaul may lead to fewer big increases in stock buybacks next year.

Rising Bond Yields Scare Wall Street

For the equity markets, the recent spike in bond yields is becoming an uncomfortable Deja vu.

Back in late January and early February, there was a 10 percent correction in the S&P 500.  The equity markets were in a bit of a panic as Treasury yield increases intensified with a monthly payrolls report showing the largest wage gains for workers since 2009.

This time around, strong economic data worried bond investors, who sent the benchmark yield on Tuesday to 3.261 percent, the highest since early May 2011.

The S&P was down nearly 4 percent in less than five sessions as of Wednesday afternoon. Still, that decline is from all-time high levels, so the market has not been knocked too far off.

Higher bond rates can weigh on stocks as they provide more competition for yield-hungry investors. They can also inhibit corporate borrowing. Historically, according to Goldman Sachs, rising bond yields have not posed major issues for stocks as long as their ascent has been gradual.

For example, a yield increase of one standard deviation or less in a month, which would be 20 basis points currently, is manageable for stocks, Goldman said in a note last week.

Historically, a monthly move of one to two deviations, or 20 to 40 basis points now, would result in flat S&P 500 returns. A move of more than two deviations, or 40 basis points currently, leads to negative S&P 500 returns, Goldman says.

Since Sept 10, the yield on the 10-year U.S. Treasury note is up about 28 basis points, including a big spike last week. In the month before the S&P 500’s correction in February, the 10-year yield rose 31 basis points, to 2.77 percent, making it an even bigger relative move since the yield at the time was at a lower starting point.

“The speed of changes in bond yields often matters more for equities than the level,” Goldman Sachs strategists said in a note.

Producer Price Index Up 0.2 Percent

Producer prices increased 0.2 percent during September, in line with expectations, while a revision to wholesale inventory estimates for August showed the largest increase in nearly five years, exceeding forecasts.

A rise in services prices offset a slight drop in prices for goods, including a 3.5 percent decline in gasoline prices. Final demand prices had fallen 0.1 percent in August. In the 12 months through September, the producer price index rose 2.6 percent, slightly less than expected. It was the first monthly rise in the producer price index since June.

Data on producer prices feed into inflation indicators watched by the Federal Reserve, which has been raising rates in hopes of keeping a price index based on personal consumption expenditures near the central bank’s 2 percent target.

The rise in wholesale inventories was slightly above the 0.8 percent expected by analysts. The component of inventories that feeds into estimates of gross domestic product growth rose 0.7 percent.

After declining inventories subtracted more than a percentage point from GDP growth in the April-June quarter, investments in inventories will likely support GDP growth going forward.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.4 percent last month, the largest increase since January. The so-called core PPI had risen 0.1 percent in August.

In the 12 months through September, the core PPI rose 2.9 percent, the same as the month before.

The cost of services rose 0.3 percent last month, reversing two months of declines, and driven by a 1.8 percent jump in transportation and warehousing services. Over one third of the increase in services was attributed to a 5.5 percent increase in the index for airline passenger services.

The index measures changes in margins received by wholesalers and retailers. Services had fallen 0.1 percent in August.

The slight decline in goods prices was the first since May 2017, led by a 0.8 percent drop in energy prices and a 0.6 percent drop in food. Excluding food and energy, goods prices rose 0.2 percent.

The report also hinted at the ongoing impact of current trade policies. Prices for oilseeds fell 3.9 percent from August to September. Soybeans have been the target of trade actions by China in retaliation for U.S. imposed tariffs.

Prices for steel mill products were unchanged month over month but are up 18 percent since September 2017. There has been a 25 percent levy on imported steel over the past several months.