US stocks ended lower on Wednesday as Treasury yields climbed to multi-year highs, adding to concerns that the Federal Reserve could raise interest rates again at its October meeting.
The Dow Jones Industrial Average fell 352.10 points, or 0.68%, to 51,511.59.
The S&P 500 dropped 0.75% to 7,706.05, while the Nasdaq Composite declined 1.13% to 26,936.04.
Nine of the 11 S&P 500 sector indexes finished lower. Utilities led the declines with a 1.72% drop, followed by communication services, which fell 1.49%.
Treasury yields climb on stronger economic data
Treasury yields rose after September purchasing managers’ index data showed that US business activity reached its highest level in more than five years.
The stronger activity readings increased expectations that the Federal Reserve could continue raising interest rates to contain inflation.
The 10-year Treasury yield reached 5.135%, its highest level since July 2007.
It also recorded its biggest one-day move since April 7, 2025. The two-year Treasury yield rose to 4.947%, its highest level since May 2024.
Federal Reserve Governor Michael Barr said further policy adjustments would likely be required as inflation remains above the central bank’s 2% target.
He also said economic growth and the labor market remained strong.
Market expectations for another rate increase strengthened following the developments.
The CME FedWatch Tool showed that the probability of a 25-basis-point rate hike in October had risen above 66%, compared with 55.4% a day earlier and 8.8% a month ago.
Oil prices rise as Iran tensions remain in focus
Oil prices also moved higher on Wednesday as investors monitored developments involving the US and Iran.
Brent crude futures for November delivery gained about 4.4% to $103.67 a barrel, while US West Texas Intermediate crude futures settled 2.6% higher at $92.91.
Iranian President Masoud Pezeshkian said during a speech at the United Nations that Tehran would not surrender to US pressure.
The comments came a day after President Donald Trump said US and Iranian officials had held a three-hour meeting and described it as very good.
Trump had also said he faced a major decision over whether to reach an agreement with Tehran or take further action against Iran.
Higher oil prices added to concerns about inflation, while the prospect of further rate increases continued to weigh on equities.
Technology stocks lead market declines
Technology stocks also contributed to the market’s decline.
Alphabet fell 3.8%, while Amazon dropped 2.2%. Nvidia declined 1.5%, pushing the PHLX Semiconductor Index 1.2% lower.
Meta Platforms bucked the broader market trend, rising 1% and extending its weekly gain to 12% following a strong reception for its Muse AI assistant.
Expedia and Airbnb both fell more than 7%.
The Nasdaq had reached record closing levels in the previous two sessions as investors remained optimistic about AI-related companies.
The S&P 500 ended Wednesday less than 2% below its record close from August 13.
Trading volume was relatively heavy, with 17 billion shares changing hands on US exchanges, compared with an average of 16.5 billion over the previous 20 sessions.
The S&P 500 was trading at just under 19 times expected earnings, its lowest valuation since 2023, according to LSEG data.
AI-related large-cap companies have accounted for much of the recent increase in earnings expectations.
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