U.S. Stocks Move Sharply Lower Amid Rising Treasury Yields

Stocks came under pressure early in the session on Wednesday and saw further downside over the course of the trading day. The major averages all moved notably lower, with the Dow and the S&P 500 extending their losing streaks to three days.

The major averages climbed off their worst levels late in the session but remained firmly negative. The Dow slumped 409.94 points or 1.0 percent to 42,514.95, the Nasdaq tumbled 296.47 points or 1.6 percent to 18,276.65 and the S&P 500 slid 53.78 points or 0.9 percent to 5,797.42.

The weakness on Wall Street came amid a continued increase by treasury yields, which have moved sharply higher over the past few sessions.

The yield on the benchmark ten-year note has risen to its highest level in almost three months amid worries the Federal Reserve will lower interest rates slower than previously anticipated.

While the Fed is still widely expected to lower interest rates by a quarter point next month, there is increasing skepticism about another rate cut in December.

CME Group’s FedWatch Tool suggests the chances the Fed will leave rates unchanged in December have jumped to 30.2 percent from just 13.9 percent a week ago.

A steep drop by shares of McDonald’s (MCD) also weighed on the Dow, with the fast food giant plunging by 5.1 percent.

McDonald’s came under pressure after the Center for Disease Control said a severe E. coli outbreak in Mountain West states has been linked to the chain’s Quarter Pounders.

Fellow Dow component Coca-Cola (KO) also showed a notable move to the downside despite reporting better than expected third quarter results.

Meanwhile, shares of AT&T (T) surged after the telecom giant reported third quarter earnings that exceeded analyst estimates.

Sector News

Computer hardware stocks showed a substantial move to the downside on the day, resulting in a 2.2 percent slump by the NYSE Arca Computer Hardware Index.

A pullback by the price of gold also contributed to considerable weakness among gold stocks, as reflected by the 1.8 percent loss posted by the NYSE Arca Gold Bugs Index.

Oil service stocks also saw significant weakness amid a decrease by the price of crude oil, dragging the Philadelphia Oil Service Index down by 1.4 percent.

Steel, biotechnology and semiconductor stocks also showed notable moves to the downside, while airline stocks bucked the downtrend.

Spirit Airlines (SAVE) led the sector higher, soaring by 46 percent after a report from the Wall Street Journal said Frontier Airlines is exploring a renewed bid for the budget airline.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance on Wednesday. Japan’s Nikkei 225 Index slid by 0.8 percent, while Hong Kong’s Hang Seng Index jumped by 1.3 percent.

Meanwhile, European stocks moved mostly lower on the day. While the German DAX Index dipped by 0.2 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index fell by 0.5 percent and 0.6 percent, respectively.

In the bond market, treasuries extended the downward trend seen over the past several sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose 3.8 basis points to a nearly three-month closing high of 4.242 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to the latest U.S. economic data, including reports on weekly jobless claims and new home sales.

Earnings news may also attract attention, with Tesla (TSLA), IBM Corp. (IBM) and Mattel (MAT) among the companies releasing their quarterly results after the close of today’s trading.