US stocks end slightly lower as bond yields hold near multi-decade highs

U.S. equities ended marginally lower on Tuesday as bond yields maintained their near multi-decade highs, ahead of inflation and labor market data. The Dow Jones Industrial Average slipped 0.26%, the S&P 500 dropped 0.17%, and the Nasdaq Composite fell 0.08%. Longer-dated U.S. Treasury yields rose, with the 30-year bond reaching 5.6206%, its highest since June 2002, while the 10-year Treasury bond climbed to 5.293%, its highest level since June 2007.

Investors assessed comments from Federal Reserve officials to gauge the path of interest rates. Expectations for a 25 basis point rate hike at the Fed's October meeting declined to 51.5%, down from nearly 70% earlier in the session, following comments from Federal Reserve Bank of New York President John Williams. Williams stated that the U.S. central bank has time to review the data before deciding on further rate hikes.

Oil prices surged, fueled by hopes of a U.S.-Iran peace deal, which diminished, pushing U.S. Treasury yields higher. Fed officials indicated more rate hikes might be required if inflation pressures do not ease after a 25 basis point rate increase this month. Several crucial economic releases were scheduled for the week, including the Personal Consumption Expenditures Price Index from the Commerce Department on Wednesday and the government payrolls report on Friday.

The upcoming Personal Consumption Expenditures Price Index (PCE) report is anticipated to have a significant impact on the Federal Reserve's policy direction. Higher yields increase the cost of capital, potentially making bonds a more attractive alternative to equities and possibly affecting corporate earnings. The Dow Jones Industrial Average closed at 51,349.92, a 0.26% decline, the S&P 500 at 7,670.84, a 0.17% decrease, and the Nasdaq Composite at 26,797.54, a 0.08% drop.

Consumer confidence plummeted, with the Labor Department reporting a drop in job openings to 7.079 million in August, below economists' expectations. The Conference Board revealed U.S. consumer confidence had fallen to a near 12-1/2-year low in September, citing concerns over the Iran war and rising interest rates. Fed officials displayed a mixed stance, with some advocating for additional rate hikes and others warning of the risks of inflation remaining above the Fed's target for an extended period.

AI-related stocks attracted attention as Anthropic's initial public offering prospectus illustrated the company's rapid growth but also reported wider losses. The company aspires to attain a valuation of over US$2 trillion, potentially setting a benchmark for AI leaders on Wall Street. Meta shares increased by 3.3%, despite OpenAI unveiling autonomous agents called "dots" that pursue user goals across apps.

Used-car retailer CarMax experienced a 4.7% rise after reporting higher second-quarter profit and revenue. Declining issues surpassed advancers on the NYSE by a ratio of 1.66-to-1 and on the Nasdaq by a ratio of 1.47-to-1. The S&P 500 had eight new 52-week highs and 33 new lows, while the Nasdaq Composite recorded 34 new highs and 244 new lows.

Trading volume on U.S. exchanges reached 16.15 billion shares, slightly above the 16.87 billion average for the session over the past 20 trading days.