Wall Street ends lower after record highs as Treasury yields climb

Wednesday saw Wall Street closing lower as US Treasury yields continued their rise, reigniting concerns about inflation and growing debt, just a day after the S&P 500 and Nasdaq reached record highs. All major US indexes fell modestly, with the S&P 500 and Dow snapping a four-day winning streak. The Nasdaq experienced its first down day in six months.

Small-cap stocks trailed behind, falling 1.3%. Crude oil prices surged past $100 per barrel due to Iran-related supply worries, spurring inflation fears and a global bond selloff, rattling markets worldwide. Investors sought relief in oil, hoping it would ease rates and support stocks, according to Thomas Martin, a portfolio manager at GLOBALT.

The third quarter was expected to be weak, but it didn't deliver, prompting some to take profits. The Federal Reserve's September meeting minutes revealed disagreement over whether the rate hike was needed to counter energy price shocks or curb demand-driven inflation. Market expectations now favor a 17.2% chance of a second consecutive Fed rate hike at the October meeting, down from 37.6% a week prior.

Expectations for further hikes have diminished, signaling a pause in the Fed's rate-hiking cycle. The Dow Jones fell 341.11 points (0.66%) to 51,180.17, the S&P 500 dropped 17.18 points (0.22%) to 7,801.75, and the Nasdaq Composite declined 61.19 points (0.22%) to 27,538.69. Industries took the biggest hit, while healthcare stocks led the gains.

The 30-year fixed mortgage rate climbed near a three-year high. Chip stocks, up 80% this year, slipped 1.2%. SpaceX tumbled 2.5% after reports of a $40 billion financing request for Nvidia chips. Next week, the third-quarter earnings season will commence, with investors closely examining AI-related expenditures and the US consumer's health amidst inflation concerns.

Analysts forecast a 30.6% year-over-year earnings growth for the S&P 500 during the July-to-September quarter.