Dow falls 0.66%; S&P 500, NASDAQ each drop 0.22%

10-year Treasury yield tops 5.36% during trading

September FOMC minutes signal possible additional rate hike this year

Wall Street in New York [Getty Images]
Wall Street in New York [Getty Images]

All three major US stock indexes fell Wednesday as long-term Treasury yields surged to their highest levels in more than two decades. Rising oil prices fanned inflation fears, while concerns over expanding US fiscal spending pushed yields higher and weighed on equities.

The Dow Jones Industrial Average closed down 341.41 points, or 0.66 percent, at 51,179.87. The S&P 500 fell 17.16 points, or 0.22 percent, to 7,801.77, and the NASDAQ Composite dropped 61.20 points, or 0.22 percent, to 27,538.69. The S&P 500 and NASDAQ pulled back slightly from the all-time highs they set the previous day.

Surging long-term Treasury yields — at their highest in more than two decades — weighed on the market. The 10-year Treasury yield climbed above 5.36 percent during trading, its highest level since 2002. The 30-year yield also rose to around 5.73 percent, a 24-year high.

US Treasury yields have remained near multi-decade highs in recent weeks, driven by growing inflation concerns tied to rising oil prices and worries about expanding US government fiscal spending.

However, strong demand at the Treasury Department's $39 billion auction of 10-year notes pulled yields back from their intraday highs. Following the well-received auction, the 10-year yield trimmed its advance to around 5.28 percent.

As Treasury yields pared some of their gains, a drop in oil prices also helped support the market. After the International Energy Agency announced it would accelerate the release of strategic reserves, West Texas Intermediate crude for November delivery fell $1.16, or 1.3 percent, while December Brent crude settled down 38 cents, or 0.38 percent, at $100.20 a barrel.

Minutes from the Federal Reserve's September FOMC meeting, released Wednesday, reaffirmed the possibility of an additional rate hike before year-end. Most participants judged it likely appropriate to raise the benchmark interest rate one more time by the end of the year, the minutes showed. No signal was given on the specific timing of any further increase.

"There's a good chance we get another rate hike this year because monetary policy isn't that restrictive right now," said David Russell, head of global market strategy at TradeStation. "Price stability is the Fed's dominant mandate when inflation is above target and most economic activity indicators are strong."


th5@heraldcorp.com