Wall Street dips as Treasury yields continue surging

As Treasury rates surged on Wednesday, Wall Street’s major indexes declined in choppy trading conditions as investors awaited news on a US funding bill and this week’s inflation data to determine the Federal Reserve’s stance for monetary policy outlook.

The 10-year Treasury yields changed course to reach a new 16-year high, which hurt megacap growth firms including Apple, Microsoft, Tesla, and Amazon, which declined by 0.5% to 1.3%.

After reporting better-than-expected quarterly revenue and profit on Tuesday, Costco Wholesale increased by 1.2%. After Morgan Stanley began coverage with an overweight recommendation on shares of the company that makes Uno playing cards, Mattel’s stock increased by 3.5%.

On the NYSE and the Nasdaq, advancing items outpaced declining ones by a ratio of 1.02 to 1 and 1.15 to 1, respectively. The Nasdaq recorded 24 new highs and 179 new lows, compared to the S&P index’s zero new 52-week highs and 43 new lows.

With an increase of more than 2%, the energy sector outperformed all other significant S&P 500 sectors and continues to pose a threat to inflation. Data indicating an unexpected increase in orders for durable US manufactured products in August as well as indications that business expenditure on equipment is starting to pick up steam have also added to the strain.

The US economy is still doing well, which is cause for concern, but readers need to see some weakening for interest rates to peak, which they have not yet seen. At 12:17 p.m. ET, the Nasdaq Composite was down 52.34 points, the S&P 500 was down 19.96 points, and the Dow Jones Industrial Average was down 194.92 points, or 0.58%, at 33,423.96.

But with a 0.9% increase, the small-cap Russell 2000 index outpaced the benchmark indices. Investors are grappling with the possibility of sustained high interest rates and an economic downturn, and the S&P 500 and Nasdaq are poised for their worst monthly performances so far this year. The Dow, as well as the other two indices, anticipate their first quarterly decline in 2023.

Investors will be keeping an eye on the second-quarter GDP, monthly PCEPI data, and Jerome Powell’s speech from the Federal Reserve for the rest of the week. In November and December, betting on the benchmark rate remaining unchanged were about 74% and 59%, respectively. A 25-basis-point rate drop is currently priced in beginning in March and increasing to over 31% in June and July.

While the House attempted to advance a Republican-backed measure, the US Senate advanced a bipartisan package on Tuesday to avert a government shutdown on Sunday. The chief watchdog of Wall Street warned US legislators that a closure would leave his organization with a skeletal workforce.