Stocks fell on Wall Street in afternoon trading on Wednesday, giving back some of their big gains from earlier this week as rising bond yields again put pressure on markets.
The S&P 500 was down 0.4% as of 1:53 p.m. ET. The benchmark index posted its best two-day gain since spring 2020.
The Dow Jones industrial average fell 80 points, or 0.3%, to 30,237, while the Nasdaq fell 0.6%.
The broader market is still reeling from September’s stumble, but investors are hopeful that signs of a softening economy could persuade central banks to stop aggressively raising interest rates. Wall Street is also gearing up for the next round of corporate earnings reports to better understand how much four decades of inflation are weighing on businesses and consumers.
Retailers, telecommunications companies and banks were among the biggest weights in the market. Target fell 0.6%, Warner Bros. Discovery fell 2.2%, Bank of America fell 1.9%.
Small-cap stocks also fell, with the Russell 2000 down 1.1%.
Treasury yields rose and put more pressure on stocks after several days of relief. The yield on the 10-year Treasury note, which helps set mortgage rates and many other types of credit, jumped to 3.77% from 3.61% late Tuesday.
The two-year Treasury yield, which more closely tracks expectations of Federal Reserve action, rose to 4.14% from 4.10% late Monday.
Energy stocks rose amid a 1.4% rise in U.S. crude oil prices. The OPEC+ cartel of oil exporting countries decided sharply reduce production to support falling oil prices. Exxon Mobil rose 4.7%.
Higher energy prices, especially gasoline, became one of the main reasons for the increase in inflation at the beginning of the year. Stubborn inflation, despite lower energy prices over the past few months, remains a focus on Wall Street. The Fed and other central banks are raising interest rates to make borrowing more difficult and slow economic growth, but Wall Street worries that the potential solution to high inflation could lead to a recession.
Investors are looking for signs that the economy is slowing enough to give central banks reason to ease rate hikes. Some signs this week included a tame rate hikes by the Reserve Bank of Australia and the US report shows that the number of available jobs fell sharply in August.
Employment has been a particularly strong area of the economy, and any sign that the red-hot labor market is cooling could mean inflation could follow. Analysts say such hopes may be premature. A report on US private sector job growth was stronger than expected on Wednesday, as was a report on the services sector.
Wall Street will get a more detailed look at US employment on Friday with the monthly government jobs report for September.
Stocks are “in the midst of a tug-of-war between reality and expectations,” said Terry Sandven, chief equity strategist at US Bank Wealth Management.
The reality is that inflation remains high, while markets expect it to have peaked and that the Fed will ease rate hikes, he said. Trading is likely to remain volatile due to these dynamics and other uncertainties looming over the market.
“We need time for inflation rates to show that they are under control,” he said.
The Fed has said it is determined to continue raising interest rates until it is satisfied that inflation is under control. This determination has been echoed by some central banks around the world.
New Zealand’s central bank raised its key interest rate to 3.5%, saying inflation remained too high, last seen at 7.3%, and labor shortages. The half-point rate hike was the fifth in a row by the Reserve Bank of New Zealand since February.
Yuri Kageyama contributed to this report.