U.S. stocks fell sharply on Wednesday as Treasury yields climbed to levels not seen in more than two decades and rising oil prices renewed concerns about inflation and the outlook for interest rates.
The Dow Jones Industrial Average fell around 500 points in morning trading, while the S&P 500 and Nasdaq Composite also retreated from recent record highs. At 9:43 a.m. ET, the Dow was down 472.21 points, or 0.92%, at 51,049.07. The S&P 500 lost 0.56% and the Nasdaq Composite dropped 0.85%.
The benchmark 10-year U.S. Treasury yield climbed above 5.35%, reaching its highest level since April 2002 and increasing pressure on equity valuations. The yield had already been trading near multi-decade highs following a broad selloff in government bonds.
The 30-year Treasury yield also advanced, reaching about 5.72%, its highest level since 2002. Higher Treasury yields can weigh on stocks by increasing borrowing costs and making government bonds more attractive relative to riskier assets such as equities.
Oil prices add to inflation concerns
Oil prices also moved higher as investors continued to assess supply risks linked to tensions in the Middle East.
Brent crude moved back above $100 a barrel, adding to concerns that higher energy costs could keep inflation elevated and complicate the Federal Reserve’s interest-rate outlook.
Brent was trading above $102 a barrel in early U.S. trading, compared with about $72 before the latest Middle East conflict began.
The combination of higher oil prices and rising bond yields prompted investors to reduce exposure to stocks after major U.S. indexes recently reached record levels.
Investors await Fed minutes
Attention was also focused on minutes from the Federal Reserve’s September policy meeting, when policymakers raised interest rates as they sought to contain inflation.
Traders broadly expect the Fed to leave rates unchanged at its October meeting, although another increase later in the year remains possible.
Investors were also preparing for a U.S. Treasury auction of $39 billion in 10-year notes, with demand for the debt sale expected to provide another test of sentiment in the bond market.
Technology shares come under pressure
Technology and semiconductor shares were among the biggest decliners as higher long-term interest rates weighed on growth stocks.
Micron Technology fell about 2.3%, while Nvidia declined around 0.7%. The Philadelphia Semiconductor Index dropped more than 2% in early trading.
Eight of the 11 major S&P 500 sectors traded lower, with materials and industrial stocks among the weakest performers. Energy and healthcare shares bucked the broader decline.
The pullback followed a strong session on Tuesday, when the S&P 500 and Nasdaq reached record closing levels, supported by optimism over artificial intelligence and expectations for strong corporate earnings.
Markets are now turning their attention to third-quarter earnings season, with analysts expecting S&P 500 companies to report strong profit growth, led by the energy and technology sectors.
