Wall Street's Momentum Shift: Stocks Retreat Amid Rising Yields

U.S. stocks closed lower on Wednesday, marking the first three-day losing streak for the S&P 500 since early September. The pullback follows a strong run where the index had rallied for six straight weeks, its longest such streak of the year. The decline was driven by increased pressure from rising Treasury yields, which can make investors less willing to pay high prices for stocks.

Stocks Lose Steam as Bond Yields Climb

Dow and Nasdaq Slide Amid Tech Sell-Off

The Dow Jones Industrial Average dropped 409 points, or 1%, while the Nasdaq composite tumbled 1.6% as big tech stocks like Nvidia and Apple were among the market's heaviest weights. Momentum has reversed for stocks this week as pressure has increased from rising Treasury yields, which can make investors less willing to pay high prices for stocks.

S&P 500 Snaps Winning Streak

The S&P 500 fell 0.9% on Wednesday, marking its first three-day losing streak since early September. The benchmark index had been on a strong run, rallying for six straight weeks to set a new record high on Friday. However, the pullback reflects the increasing pressure from rising Treasury yields in the bond market.

Sectors Impacted by Yield Surge

The surge in Treasury yields has had a significant impact on various sectors. Higher yields can make investors less willing to pay high prices for stocks, which some critics say already look too expensive after rising faster than corporate profits. This dynamic has particularly affected the technology and other high-growth sectors, which have been battling criticism that their prices soared too high amid Wall Street's frenzy around artificial-intelligence technology.

Earnings and Economic Data in Focus

The market's performance has also been influenced by a raft of economic reports that have shown the U.S. economy remains stronger than expected. This has bolstered hopes that the economy can avoid a painful recession, but it has also led to expectations that the Federal Reserve will need to maintain its aggressive interest rate hikes to tame inflation. Traders are now largely expecting the Fed to cut its main interest rate by half a percentage point more through the end of the year, a shift from a month ago when some were betting on a larger cut.

Sector Movers and Shakers

The market's losses were not evenly distributed, with some sectors and individual stocks bucking the broader trend. McDonald's was a notable decliner, falling 5.1% after federal health officials linked its Quarter Pounder burgers to an E. coli outbreak. Coca-Cola also fell 2.1% despite reporting stronger-than-expected profit and revenue for the latest quarter. On the other hand, AT&T rose 4.6% after reporting stronger-than-expected profit, while Texas Instruments and Northern Trust also gained on positive earnings results.

Global Markets React to Shifting Dynamics

The reversal in momentum was not limited to the U.S. markets, as global stocks also felt the impact of the rising yields and economic uncertainty. Japan's Nikkei 225 slipped 0.8%, while Chinese markets rose for a second day after the central bank cut key lending rates. European markets were also modestly lower, reflecting the broader shift in sentiment.