US stocks closed lower on Wednesday as a renewed rise in long-term Treasury yields weighed on equities, with investors also assessing the prospect of another Federal Reserve rate increase before the end of the year.
The Dow Jones Industrial Average fell 341.41 points, or 0.66%, to 51,179.87.
The S&P 500 declined 0.22% to 7,801.77, while the Nasdaq Composite slipped 0.22% to 27,538.69.
Treasury yields rise to 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 sold $39 billion of 10-year notes.
The yield was last little changed after the auction.
The 30-year Treasury yield also reached 5.732%, its highest level since May 2002, before pulling back from its session high.
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 level since 2000.
Rising Treasury yields have remained a key source of pressure for stocks as investors assess inflation, higher energy prices and increasing debt levels.
The 10-year yield has risen about 60 basis points since the end of July.
Fed minutes point to another rate hike
Investors also assessed minutes from the Federal Reserve’s September meeting, which indicated that most officials considered another increase in the federal funds rate likely to be appropriate by the end of the year.
The minutes did not indicate when another increase could take place, while officials stressed that future decisions would depend on incoming economic data and the outlook for risks.
Financial markets were pricing in less than a 20% probability of another rate increase at the Fed’s October meeting, according to CME’s FedWatch tool, down from 37.6% a week earlier.
Higher yields weighed on several parts of the stock market.
Bank shares declined, with Goldman Sachs and Bank of America each falling 1%, while Wells Fargo, Citigroup and JPMorgan also ended lower.
Technology stocks also came under pressure as investors considered the impact of higher borrowing costs on artificial intelligence investment.
CrowdStrike fell nearly 5%, while Palo Alto Networks and Meta Platforms declined more than 3% and 2%, respectively.
Oil prices and AI spending remain in focus
Oil prices remained elevated, adding to concerns about inflation and interest rates. US crude traded just below $90 a barrel, while Brent crude was around $101.
Brent had briefly moved above $100 earlier in the session before turning lower after the International Energy Agency agreed to speed up the release of oil stocks, with diesel supplies prioritised.
The move helped stocks pare some of their losses.
Housing-related stocks also weakened as higher Treasury yields pushed mortgage rates higher. Housing stocks fell 2.3%, while 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 towards 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.
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