US stocks declined on Wednesday as investors reacted to a surge in Treasury yields, which added to their existing concerns about the potential impact of recent data on interest rates.
The S&P 500 fell by more than 0.7%, while the Dow Jones Industrial Average dropped by about 1%, resulting in a loss of over 400 points and leading the overall market decline. The Nasdaq Composite also experienced a decline of approximately 0.6%.
Investors are becoming increasingly cautious as they consider the implications of the rising US bond yields following a disappointing government debt auction. This development has raised concerns that the Federal Reserve may maintain higher interest rates for a longer period of time.
The yield on 5-year Treasurys reached near four-week highs this week, while the 10-year yield has surpassed the significant level of 4.5%, trading at around 4.62% on Wednesday. This represents the highest level since early May.
The concerns seem to be overshadowing the optimism surrounding the growth of AI, which had previously boosted the Nasdaq to a new high following Nvidia’s impressive earnings report. Nvidia’s stock continued to rise for the fourth consecutive day on Wednesday, reaching a record high.
Investors are also attempting to decipher the implications of Tuesday’s better-than-expected consumer confidence data on the Federal Reserve’s monetary policy decisions. However, they are prepared for a prolonged period before any indication of interest rate cuts, given the numerous cautionary statements from Fed officials.