Stocks fell on Wall Street in Wednesday afternoon trade, giving back some of their big gains from earlier this week as rising bond yields added to the pressure on the market again.
The S&P 500 was down 0.4% at 1:53 p.m. Eastern time. The benchmark index is out of its best two-day rally since spring 2020.
The Dow Jones Industrial Average fell 80 points, or 0.3%, to 30,237 and the Nasdaq fell 0.6%.
The broader market is still bruised from its stumble in September, but investors have been hoping that signs of economic weakness can convince central banks to temper their aggressive rate hikes. Wall Street is also preparing for the next round of corporate earnings reports to get a better understanding of how hard the hottest inflation in four decades is pressuring businesses and consumers.
Retailers, communications companies and banks are among the biggest weights on the market. Target is down 0.6%, Warner Bros. Discovery is down 2.2%, Bank of America is down 1.9%.
Smaller company shares also fell, sending the Russell 2000 index 1.1% lower.
Treasury yields rose and put more pressure on stocks after several days of relief. The yield on the 10-year Treasury, which helps set interest rates for mortgages and many other types of loans, jumped to 3.77% from 3.61% late Tuesday.
The yield on the two-year Treasury, which more closely tracks expectations for the Federal Reserve’s action, rose to 4.14% from 4.10% late Monday.
Energy stocks rose as US crude prices rose 1.4%. The OPEC+ cartel of oil-exporting countries decided to cut production sharply to support falling oil prices. Exxon Mobil was up 4.7%.
Higher energy prices, especially for gasoline, were the main reason for the spike in inflation at the start of the year. Scorching inflation, despite easing energy costs over the past few months, remains a big focus for Wall Street. The Fed and other central banks have raised interest rates to make borrowing harder and slow economic growth, but Wall Street is concerned that a potential solution to high inflation could lead to a recession.
Investors are looking for signs that the economy is slowing enough to allow the central bank an excuse to reduce interest rate hikes. Some of the signs this week include a taming interest rate hike by Australia’s central bank and a US report showing that the number of available jobs plummeted in August.
Employment has been a very strong area of the economy and signs that the hot job market is cooling could mean that inflation may follow. Analysts say such expectations may be premature. A report on US job growth in private companies came in stronger than expected on Wednesday, as did a report on the services sector.
Wall Street will get a more detailed look at US jobs on Friday with the government’s monthly jobs report for September.
Stocks “are in a tug-of-war between reality and expectations,” said Terry Sandven, head of equity strategy at US Bank Wealth Management.
The reality is that inflation remains hot while the market expects it to have peaked and that the Fed will reduce rate hikes, he said. Trading is likely to remain volatile due to the dynamics and other uncertainties hanging over the market.
“We need time for the inflation rate to show control,” he said.
The Fed has said it is determined to continue raising interest rates until it is satisfied that inflation is under control. That determination has been echoed by several central banks globally.
New Zealand’s central bank raised its benchmark interest rate to 3.5%, saying inflation remains too high, last at 7.3%, and labor is scarce. The half-point rate hike was the fifth in a row by the Reserve Bank of New Zealand since February.
Yuri Kageyama contributed to this report.