By Caroline Valetkevitch
NEW YORK – U.S. stocks fell on Wednesday as Treasury yields rose above the psychologically important 3% level and oil prices jumped, fanning worries about inflation and the outlook for interest rates.
The S&P 500 ended down more than 1% in the broad sell-off, snapping a two-day winning streak.
Among its biggest drags, shares of Intel Corp slid 5.3% after Citi cut its estimates on the chipmaker for the second time in a week. Citi pointed to uncertainty about demand for personal computers and predicted the company could pre-announce weaker-than-expected earnings for the second quarter. Other chip shares also fell.
Brent crude oil prices rose above $123 a barrel and hit a 13-week high, while the Dow Jones transportation average fell 3.8%, significantly underperforming the other main indexes on the day. The S&P 500 energy sector was the only sector to end higher.
“The 10-year Treasury yield is up over 3%. That’s probably part of why we’re seeing the drawdown in the market today,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
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“That level is what people are focused on because it represents an increase in interest rates and a reflection of inflation and market volatility.”
U.S. benchmark 10-year Treasury yields rose after the U.S. Treasury Department saw tepid demand for a sale of 10-year notes. Rising interest rates tend to be a negative for stocks.
The Dow Jones Industrial Average fell 269.24 points, or 0.81%, to 32,910.9; the S&P 500 lost 44.91 points, or 1.08%, to 4,115.77; and the Nasdaq Composite dropped 88.96 points, or 0.73%, to 12,086.27.
Investors are also cautious ahead of U.S. consumer price data on Friday morning. The report is expected to show that inflation remained elevated in May, though core consumer prices – which exclude the volatile food and energy sectors – likely ticked down on an annual basis.
The U.S. Federal Reserve is expected to raise rates by 50 basis points at each of its June and July meetings, with a similar move also likely in September, in an effort to combat inflation.
Declining issues outnumbered advancing ones on the NYSE by a 2.78-to-1 ratio; on Nasdaq, a 1.33-to-1 ratio favored decliners.
The S&P 500 posted three new 52-week highs and 29 new lows; the Nasdaq Composite recorded 36 new highs and 70 new lows.
Volume on U.S. exchanges was 10.62 billion shares, compared with the 12.26 billion-share average for the full session over the last 20 trading days.
(Additional reporting by Devik Jain and Mehnaz Yasmin in Bengaluru; Editing by Arun Koyyur, Aditya Soni and Jonathan Oatis)