U.S. equities opened sharply lower on Wednesday, with the Dow Jones Industrial Average dropping 422 points, as a rebound in oil prices and a fresh surge in Treasury yields renewed pressure on the market. The S&P 500 fell 0.44% and the Nasdaq Composite declined 0.62%, pulling back from the record highs set in the previous session.
The pullback comes just one day after the S&P 500 and Nasdaq closed at all-time highs, buoyed by strength in technology and semiconductor shares. Investors are now turning cautious as they await the release of the Federal Reserve's minutes from its September policy meeting, which could offer clues on the central bank's next moves.
Treasury yields climb to multi-year highs
The benchmark 10-year Treasury yield rose more than six basis points to 5.35%, its highest level since April 2002. The 30-year yield climbed over eight basis points to 5.73%, also reaching levels not seen in more than two decades. These moves follow a brief easing on Tuesday, which had helped lift equities.
Investors are closely watching the Fed minutes for insights into policymakers' views on inflation and the future path of interest rates. At its September meeting, the central bank raised rates for the first time since 2023, and the minutes could provide additional context on the decision. According to the CME FedWatch Tool, markets widely expect the Fed to hold rates steady at its October meeting, though a December hike remains on the table.
The Treasury is also scheduled to auction $39 billion in 10-year notes later Wednesday, which could add further volatility to the bond market.
Oil prices add to inflation concerns
Oil prices moved higher, with Brent crude trading around $101.73 a barrel, up about 1%, while U.S. crude futures approached $90. The rise is driven by persistent concerns over Middle Eastern supply, following recent geopolitical tensions. Higher energy costs are feeding into inflation expectations, which in turn influence the Fed's policy outlook.
The combination of elevated oil prices and climbing Treasury yields weighed heavily on equities, as investors reassess the impact on corporate borrowing costs and consumer spending.
Chip stocks lead declines
Technology and semiconductor names were among the biggest losers in early trading. Micron Technology fell 2.65%, while AMD, Broadcom, and Marvell Technology also declined. SpaceX shares dropped 0.99% following a Financial Times report that the company is seeking $40 billion in financing to fund purchases of Nvidia chips.
On the upside, Constellation Brands gained 2.14% despite lowering its annual operating margin forecast, as investors focused on its revenue growth.
With the third-quarter earnings season set to begin next week, analysts expect S&P 500 earnings to increase 30.6% overall for the July-to-September period, according to LSEG. Energy sector earnings are projected to surge 114.7%, while technology earnings are forecast to rise 66.5%.
This article is for informational purposes only and does not constitute financial advice.
