Wall Street closed lower on Wednesday, dragged down by inflation concerns. Investor sentiment weakened as Middle East uncertainty drove bond yields to multiyear highs. All of the three benchmark indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) lost 405.41 points, or 0.8%, to close at 52,380.66. Twenty-five components of the 30-stock index ended in negative territory, while five ended in positive.
The tech-heavy Nasdaq Composite fell 168.07 points, or 0.6%, to close at 26,253.34.
The S&P 500 slid 37.16 points, or 0.5%, to close at 7,636.36. Seven of the 11 broad sectors of the benchmark index closed in the red. The Industrials Select Sector SPDR (XLI), the Consumer Discretionary Select Sector SPDR (XLY) and the Utilities Select Sector SPDR (XLU) declined 1.5%, 1.2% and 1.1%, respectively, while the Energy Select Sector SPDR (XLE) advanced 1.1%.
The fear gauge CBOE Volatility Index (VIX) increased 4.7% to 16.46. A total of 14.7 billion shares were traded on Wednesday, lower than the last 20-session average of 14.9 billion. Decliners outnumbered advancers by a 4.1-to-1 ratio on the S&P 500.
Oil Continues to Climb as Middle East Tensions Persist
Rising oil prices dominated Wall Street headlines on Wednesday, as renewed Iran-U.S. attacks near the Strait of Hormuz intensified concerns about Middle East energy supplies. Brent crude futures surged above the key $100-per-barrel threshold, settling at $101.21, up 3.4%, while WTI climbed 3.25% to $96.05. Both benchmarks posted their highest closes since May 22.
The oil rally weighed on U.S. markets as investors assessed the potential economic fallout from a prolonged supply disruption. Higher crude prices could raise transportation and production costs, fuel inflation and squeeze consumer spending, complicating the Federal Reserve’s policy outlook. The escalation also reversed optimism that had followed the temporary June ceasefire, bringing geopolitical and energy risks back to the forefront of investor sentiment.
Investor Sentiment Weakens as Bond Yields Rise
Investor sentiment turned cautious on Wall Street as Treasury yields climbed on Wednesday. The benchmark 10-year Treasury yield rose 4 basis points (bps) to 4.845%, reaching its highest level since November 2023. The 30-year Treasury yield increased 3 bps to 5.295%, while the 2-year yield jumped nearly 4 bps to 4.436%. Yields rose after the Treasury unveiled a debt buyback plan of up to $6 billion in 10- to 20-year bonds, below some analysts’ expectations.
Elevated Treasury yields make risk-free government securities more attractive relative to equities, pressuring stock valuations. Investors also awaited Thursday’s producer price data and Friday’s consumer inflation report for clues on the Federal Reserve’s next interest-rate move.
Consequently, Amazon.com, Inc. AMZN and Starbucks Corporation SBUX lost 1.8% and 1.9%, respectively. While AMZN has a Zacks Rank #2 (Buy), SBUX carries a #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
No economic data was released on Wednesday.
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