NEW YORK — US stocks slide Wednesday as pressure from the bond market intensified following a surprisingly strong reading on economic activity and a rebound in oil prices, heightening worries about inflation.
The S&P 500 fell 0.8% after ending the prior session just 0.4% below its record from last month. The Dow Jones Industrial Average lost 352 points, or 0.7%. The Nasdaq composite declined 1.1% from its all-time high.
Equities weakened after the 10-year Treasury yield jumped to 5.10% from 4.96% late Tuesday, a sizable move for bonds. Higher yields typically pressure stock valuations and raise borrowing costs across the economy.
During the session, the 10-year yield briefly approached 5.14%, returning to levels last seen in 2007 before the global financial crisis drove yields lower. The climb in yields, which began after their pandemic-era lows, has accelerated amid persistent inflation concerns, elevated U.S. government debt, and other risks.
US stocks slide as business activity accelerates
Inflation worries intensified after a preliminary survey indicated U.S. business activity expanded at the fastest pace in more than five years. While the pickup signals resilience, it also suggests the economy may still be fueling price pressures.
According to Chris Williamson, chief business economist at S&P Global Market Intelligence, the report showed companies’ input costs rising at the quickest rate in four years, partly due to higher oil prices. Those cost increases could be passed on to consumers in coming months.
Oil’s advance added to the inflation narrative. Prices have been supported by concerns that the war with Iran could constrain Middle East supplies for an extended period.
Brent crude for November delivery rose 3.9% to $103.08 a barrel, reversing part of a pullback after nearing $110 last week. Mediated talks involving U.S. and Iranian officials are ongoing, though no concrete outcome has emerged. The more actively traded December Brent contract gained 2.8% to $98.12. Despite the recent retreat, Brent remains well above the roughly $72 level before the war began.
With inflation stubbornly elevated, the Federal Reserve raised its benchmark interest rate last week for the first time in three years to cool price growth.
Fed signals more hikes as corporate results roll in
Federal Reserve Governor Michael Barr said in a speech Wednesday that additional increases “are likely to be needed” to bring inflation back to the 2% target. Futures pricing shows traders see better than a 50% chance the Fed will lift the federal funds rate at each of its next two meetings in October and December, according to CME Group data.
Solid corporate earnings have thus far provided support to the market despite higher rates and costlier energy. KB Home reported quarterly profit above Wall Street expectations, but shares fell 3% after its executive chairman said industry conditions worsened over the past three months. He cited higher mortgage rates, tied to the 10-year Treasury yield, and pressures from “geopolitical uncertainty and broader economic headwinds.”
General Mills also topped profit estimates, but said it expects fiscal-year growth to trail its historical pace due to a challenging consumer environment, and it did not raise its full-year profit outlook. Its shares ultimately rose 1% after fluctuating.
By the close, the S&P 500 fell 58.61 points to 7,706.03. The Dow dropped 352.10 to 51,511.59. The Nasdaq composite slid 308.24 to 26,936.04.
Overseas, major indexes declined across much of Europe and Asia. Hong Kong’s benchmark lost 1% and Shanghai’s slipped 0.4% ahead of Chinese President Xi Jinping’s state visit to Washington beginning Wednesday.
Leaders are expected to seek stability in relations during their third meeting since President Trump returned to the White House, even as the two countries compete on artificial intelligence and trade and vie for influence in hot spots including Iran and Taiwan.
AP Business Writers Chan Ho-him and Michelle Chapman contributed.