Wall Street's fear gauge spikes to a 4-month high as investors worry the market downturn will deepen

• Wall Street's "fear gauge" passed a key level Tuesday with investors rattled by soaring bond yields.
• Stocks have plummeted with traders expecting interest rates to stay high well into 2024.

A widely-followed "fear gauge" hit a four-month high Tuesday, as Wall Street continued to fret about spiking bond yields.

The CBOE Volatility Index, or the VIX, had an intraday peak of over 20, breaching that level for the first time since May 24.

The index, which measures market uncertainty by tracking options, has shaken off a quiet summer to climb higher in recent weeks with the first-half rally for stocks grinding to a halt.

The benchmark S&P 500 has tumbled 8% since the end of July, dragged down by traders' worry that the Federal Reserve will try to kill off still-sticky inflation by holding interest rates at their current level well into 2024.

The tech-heavy Nasdaq Composite is down 9% over the same period, while the Dow Jones Industrial Average has shed nearly 2,600 points, erasing all its 2023 gains.

Signs that the Fed will stay hawkish have also fueled a brutal bond-market sell-off, adding to investors' headaches.

Ten-year US Treasury yields have shot up nearly 80 basis points since the start of August to a level not seen since before the 2008 financial crisis.

While the VIX has shifted higher over the past two months, it's still trading well below its high for the year. That came in mid-March as the collapse of California lender Silicon Valley Bank sparked fears of a full-blown financial crisis.