On Wednesday, U.S. stock indexes experienced a downturn, following Tuesday's mixed performance. The Dow demonstrated a particularly notable decline, closing at its lowest level in nearly a month.
All the major averages ended the day firmly in negative territory. The Dow plummeted by 411.32 points, or 1.1%, to 38,441.54. The S&P 500 dropped by 39.09 points, or 0.7%, to 5,266.95, and the Nasdaq fell by 99.30 points, or 0.6%, to 16,920.58.
The slump on Wall Street was driven by a continued rise in treasury yields, with the yield on the benchmark ten-year note reaching its highest level in nearly a month. On Tuesday, the ten-year yield exceeded 4.5% as auctions for two-year and five-year notes saw significantly lower-than-average demand.
This ongoing increase in treasury yields has heightened concerns about the future of interest rates, especially with key inflation data expected later in the week. On Friday, the Commerce Department is set to release its report on personal income and spending for April, which includes inflation readings closely monitored by the Federal Reserve.
The forthcoming inflation data could significantly impact interest rate predictions ahead of the Fed's next monetary policy meeting on June 11-12. Minneapolis Fed President Neel Kashkari, in an interview with CNBC on Tuesday, emphasized the need for "many more months of positive inflation data" before considering an interest rate cut. Although Kashkari doesn't have a vote on the rate-setting Federal Open Market Committee this year, he did not rule out the possibility of raising interest rates if inflation remains high.
Some traders might have also capitalized on recent gains in the tech sector, which had driven the Nasdaq to a record closing high on Tuesday, buoyed by a surge in Nvidia (NVDA) shares.
### Sector News
The decrease in crude oil prices led to significant weakness among energy stocks, with both the NYSE ARCA Oil Index and the Philadelphia Oil Service Index dropping by 2.2%. Airline stocks also faced a substantial decline, as evidenced by the NYSE Arca Airline Index falling by 2.0% to its lowest close in nearly six months. American Airlines (AAL) notably fell by 13.5% after revising its second-quarter earnings guidance downward. Additionally, gold stocks saw marked weakness due to the decline in gold prices, with steel, semiconductor, and telecom stocks also moving significantly lower.
### Other Markets
In overseas trading, most Asia-Pacific stock markets saw declines on Wednesday. Japan’s Nikkei 225 Index fell by 0.8%, and Hong Kong’s Hang Seng Index dropped by 1.8%. European markets also moved lower; the French CAC 40 Index tumbled by 1.5%, the German DAX Index fell by 1.1%, and the U.K.’s FTSE 100 Index slid by 0.9%.
In the bond market, treasuries continued the downward trend, with the yield on the benchmark ten-year note rising by 8.2 basis points to a nearly one-month high of 4.624%.
### Looking Ahead
Investors may focus on reports covering weekly jobless claims, first-quarter GDP, and pending home sales on Thursday. However, trading activity might be subdued as markets await the closely watched inflation data scheduled for release on Friday.
