US stocks ended Wednesday in the red, with the Dow Jones Industrial Average shedding 341.41 points, or 0.66%, to close at 51,179.87. The S&P 500 declined 0.22% to 7,801.77, and the Nasdaq Composite slipped 0.22% to 27,538.69. The sell-off was driven by a renewed surge in long-term Treasury yields, which touched levels not seen in over two decades, and by investor scrutiny of the Federal Reserve's latest policy meeting minutes.
Treasury Yields Hit Multi-Year Highs
The 10-year Treasury yield climbed to 5.365% during the session, its highest level since April 2002, before easing after the Treasury's auction of $39 billion in 10-year notes. The 30-year yield also reached 5.732%, its highest since May 2002, before pulling back. Demand at the 10-year auction was considered strong, with indirect bidders—including global central banks—taking 80.3% of the notes. The auction yield was around 5.3%, its highest since 2000.
Rising Treasury yields have been a persistent headwind for equities, as investors weigh inflation, elevated energy prices, and growing government debt. The 10-year yield has climbed about 60 basis points since the end of July, reflecting a shift in the cost of capital that analysts see as structural.
Fed Minutes Point to Another Hike
Investors also parsed the minutes from the Fed's September meeting, which indicated that most officials viewed another increase in the federal funds rate as likely appropriate by year-end. The minutes did not specify a timeline, stressing that future decisions would depend on incoming data and the risk outlook. According to CME's FedWatch tool, markets now price in less than a 20% probability of a hike at the October meeting, down from 37.6% a week earlier.
Higher yields weighed on several sectors. Bank stocks declined, with Goldman Sachs and Bank of America each falling 1%, while Wells Fargo, Citigroup, and JPMorgan also ended lower. Technology shares came under pressure as investors considered the impact of higher borrowing costs on artificial intelligence investments. CrowdStrike fell nearly 5%, while Palo Alto Networks and Meta Platforms dropped more than 3% and 2%, respectively.
Oil Prices and AI Spending in Focus
Oil prices remained elevated, adding to inflation concerns. US crude traded just below $90 a barrel, while Brent crude hovered around $101. Brent briefly moved above $100 earlier in the session before retreating after the International Energy Agency agreed to accelerate the release of oil stocks, prioritizing diesel supplies. That move helped stocks pare some losses.
Housing-related stocks weakened as higher Treasury yields pushed mortgage rates up. Housing stocks fell 2.3%, and homebuilders declined 2.9%. Chip stocks, which had gained more than 80% this year, also ended lower. SpaceX shares retreated following reports that the company was seeking $40 billion in financing to purchase Nvidia chips.
Investors are now turning to the third-quarter earnings season, with financial companies expected to begin reporting in earnest next week. Analysts expect S&P 500 earnings to grow 30.6% year over year for the July-through-September period.
This article is for informational purposes only and does not constitute financial advice.
