U.S. stocks declined on Wednesday as rising Treasury yields and uncertainty about potential interest rate cuts from the Federal Reserve weighed on the market.
The Dow Jones Industrial Average fell more than 1%, reaching its lowest point in nearly a month. All sectors of the S&P 500 ended in the red, with utilities, which are sensitive to interest rates, among the hardest hit.
The yield on the benchmark 10-year U.S. Treasury note rose to a four-week high of 4.6%, extending gains from Tuesday following weak debt auctions.
“You continue to see this rise in bond yields, which is pressuring equities. It’s a continuation of this unstable, uneven recovery,” commented James Abate, fund manager of the Centre American Select Equity fund.
The market has been on edge since the beginning of the year due to conflicting expectations about the timing and extent of potential interest rate cuts. Persistent inflation and hawkish statements from central bankers have led traders to lower their rate cut expectations to just one by November or December, down from multiple cuts anticipated earlier in the year, according to the CME FedWatch Tool.
Stocks maintained their losses after the release of the Beige Book, a Federal Reserve survey, which indicated that U.S. economic activity continued to expand from early April through mid-May. However, businesses grew more pessimistic about the future, and inflation increased at a modest pace.
The S&P 500 dropped 39.09 points, or 0.74%, to 5,266.95, while the Nasdaq Composite fell 99.30 points, or 0.58%, to 16,920.58. The Dow Jones Industrial Average declined 411.32 points, or 1.06%, to 38,441.54.
Investors are now looking ahead to Friday’s release of April’s Personal Consumption Expenditure data, the Federal Reserve’s preferred inflation measure.
The Nasdaq pulled back after closing above the 17,000 mark for the first time on Tuesday, while the small-cap Russell 2000 index dropped 1.5%.
In after-hours trading, shares of Salesforce fell more than 15% as the company reported results and projected second-quarter revenue below estimates. Salesforce shares had ended the regular session up 0.7%.
During the regular session, shares of Marathon Oil surged 8.4% after ConocoPhillips announced it would acquire the company in an all-stock deal valued slightly above $15 billion. ConocoPhillips shares dropped 3.1%, and the energy sector overall declined 1.8%.
Airline stocks also took a hit, led by American Airlines, which plummeted 13.5% after the company reduced its second-quarter profit forecast.
Conversely, Dick’s Sporting Goods climbed 15.9% after raising its annual sales and profit forecasts, while Abercrombie & Fitch soared 24.3% following an increased annual sales growth forecast.
On the Nasdaq, declining issues outnumbered advancers by a 2.78-to-1 ratio, and by a 5.25-to-1 ratio on the NYSE.
The S&P 500 recorded 7 new 52-week highs and 16 new lows, while the Nasdaq Composite saw 45 new highs and 149 new lows.
Trading volume on U.S. exchanges reached 12.24 billion shares, compared to the 12.38 billion average for the last 20 trading days.
