Dow Jones Industrial Average leads decline as rising Treasury yields rattle nerves

U.S. stocks edged lower on Wednesday as a sharp rise in Treasury yields spooked investors as they considered whether recent data would change the direction of interest rates.

The benchmark S&P 500 (^GSPC) fell 0.7%, while the Dow Jones Industrial Average (^DJI) lost about 0.9%, a loss of nearly 350 points. The Nasdaq Composite Index (^IXIC) also fell more than 0.7%.

Stocks have been selling off following the failed bond auction as investors worry about rising Treasury yields and fear the Federal Reserve will keep interest rates high for a long time.

The 5-year Treasury yield rose to a four-week high on Tuesday, while the 10-year Treasury yield (^TNX) surpassed the key 4.5% level. On Wednesday, the benchmark yields rose further, trading around 4.57%.

Those concerns appear to outweigh hopes for AI growth, which has ridden Nvidia Inc.’s (NVDA) stock rally after the company’s earnings report and propelled the Nasdaq to an all-time high.

Investors are trying to figure out what a better-than-expected consumer confidence reading released on Tuesday means for the Fed’s policy decisions, but they are bracing for it to be a long wait before they cut rates after repeated warnings from officials.

read more: How does the labor market affect inflation?

The Fed’s Beige Book, due for release later on Wednesday, could provide more information ahead of Friday’s release of PCE, the central bank’s preferred inflation measure.