The US stock market fell on Wednesday as the Dow Jones crashed 565.20 points, or 1.10%. The S&P 500 fell 0.68% and the Nasdaq dropped 0.83%. Rising Treasury yields, which hit their highest level since April 2002, and higher oil prices caused this pressure as investors worried about future inflation.
Synopsis
Why is the US stock market down today? The Dow Jones crashes today, falling 565 points, or 1.10%. The S&P 500 slipped 0.68% to 7,765.65, while the Nasdaq fell 0.83% to 27,370.15. Rising Treasury yields are driving much of the pressure. The 10-year yield climbed above 5.36%, its highest level since April 2002. Oil also rose, with Brent above $101, adding fresh inflation concerns ahead of the Federal Reserve minutes.
US stock market down today: Dow Jones crashes, Nasdaq and S&P 500 slide - U.S. stocks gave back part of Tuesday’s record-setting rally on Wednesday as a sharp rise in Treasury yields put pressure on equities.
At 10:53 a.m. ET, the Dow Jones Industrial Average was down 565.20 points, or 1.10%, at 50,956.08. The S&P 500 fell 53.28 points, or 0.68%, to 7,765.65. The Nasdaq dropped 229.73 points, or 0.83%, to 27,370.15.
The S&P 500 and Nasdaq had just closed at record highs on Tuesday. One day later, investors were looking at a very different bond market.
Why is the U.S. stock market down today as Treasury yields hit a 24-year high?
The 10-year Treasury yield climbed above 5.36% early Wednesday before easing to about 5.32%. That was its highest level since April 2002.
The latest market data put the 10-year yield at 5.306%, up 0.025 percentage point. The 30-year yield was even higher at 5.685%.
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Treasury yields influence the price investors are willing to pay for stocks. When government bonds offer higher returns, investors can demand more from riskier assets.
Higher yields also raise borrowing costs across the economy. Mortgage rates, corporate loans and other long-term financing are tied in part to Treasury rates.
For high-growth technology companies, the effect can be larger. Much of their value comes from profits expected years in the future. Higher interest rates reduce the present value of those future profits.
Oil is back near $90
Oil prices added another concern for investors.
West Texas Intermediate crude was around $89.56 a barrel, while Brent crude stood at $101.49. Brent was up 0.90% in the latest data.
The move followed attacks by Iran-backed Houthi rebels on Saudi targets and developments involving tanker traffic through the Strait of Hormuz.
Sustained higher oil prices can feed into transportation, manufacturing and consumer costs.
That creates a problem for the Federal Reserve. If energy prices push inflation higher, policymakers have less room to cut rates and may need to keep borrowing costs elevated for longer.
The Fed minutes could change the rate outlook
Investors are waiting for the Federal Reserve's September meeting minutes at 2 p.m. ET.
The minutes should offer more detail on the debate among policymakers after the Fed's September interest-rate increase. Markets are already trying to estimate what comes next.
CME FedWatch data cited by Investopedia showed traders assigning a 19% probability to another rate increase at the late-October meeting. The December meeting was different, with an 83% probability priced in for at least a quarter-point increase.
AI and semiconductor stocks are giving back Tuesday's gains
Technology stocks were among the biggest beneficiaries of Tuesday's rally. Some are now giving back those gains.
The iShares Semiconductor ETF was down about 1.5%. Marvell Technology and Advanced Micro Devices both fell after rising sharply the previous day.
Nvidia slipped 0.56% to $237.91.
Nvidia's move looks small on its own. Its size makes it important for the broader market. The company is approaching a $6 trillion market capitalization, so relatively modest percentage moves can translate into large changes in total market value.
The Roundhill Magnificent Seven ETF was also down about 1%.
Bitcoin and crypto stocks are falling
Bitcoin fell 3.07% to about $82,962 after trading near $85,700 overnight. Ether dropped 5.14% to $2,561. XRP fell 4.78%, while Litecoin declined 4%.
The Nasdaq Crypto Index was down 3.48%.
Crypto-linked stocks also moved lower. Strategy, Coinbase, Robinhood, Mara Holdings and Circle all declined as Bitcoin retreated.
The dollar is rising while gold and silver fall
The U.S. dollar index rose 0.5% to 102.34. Gold fell 1.31% to $4,132.40 an ounce, while silver dropped 2.34% to $60.15.
Higher Treasury yields can make interest-bearing assets more attractive relative to gold, which doesn't pay interest. A stronger dollar can also weigh on dollar-priced commodities.
The rise in long-term Treasury yields comes as the U.S. government carries more debt.
U.S. national debt has passed $40 trillion, and the government must regularly issue new securities to finance spending and refinance existing obligations.
Higher yields mean higher borrowing costs over time.
The 10-year Treasury yield was below 4% before the Iran war. It is now above 5.3%.
Still, several individual shares are moving against the market. Intel was up 1.28% at $113.94. Lipocine rose 9.53%, while Lucas GC gained 29.55%.
Webull was among the notable decliners, falling 19.71% to $5.84.
The key events Wednesday are the Federal Reserve minutes and the $39 billion Treasury auction of 10-year notes.
The auction will show how investors are responding to current yields. Strong demand could ease some pressure on rates. Weak demand could have the opposite effect.
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