Stocks Slump as Wall Street’s Big Rally Fades

NEW YORK (AP) — Stocks fell in morning trading on Wall Street Wednesday and gave back some of the big gains from earlier this week as rising bond yields amp up pressure on markets again.

The S&P 500 fell 1.5% as of 10:15 a.m. Eastern. The benchmark index is coming off its best two-day rally since the spring of 2020.

The Dow Jones Industrial Average fell 340 points, or 1.2%, to 29,967 and the Nasdaq fell 1.9%.

The broader market is still bruised from its stumble in September, but investors have been hoping that signs of a softening economy may convince central banks to temper their aggressive interest rate hikes. Wall Street is also preparing for the next round of corporate earnings reports to get a better sense of how hard the hottest inflation in four decades is squeezing businesses and consumers.

Technology stocks and retailers led the broad losses Wednesday. Microsoft fell 1.6% and Amazon fell 1.9%.

Treasury yields rose and applied more pressure to stocks after several days of relief. The yield on the 10-year Treasury, which helps set rates for mortgages and many other kinds of loans, rose significantly to 3.76% from 3.61% late Tuesday.

The yield on the two-year Treasury, which more closely tracks expectations for Federal Reserve action, rose to 4.19% from 4.10% late Monday.

Energy stocks held up better than the rest of the market. The OPEC+ cartel of oil-exporting countries is debating a potentially large cut in the amount of crude it ships to the global economy, which would likely result in higher oil and gasoline prices.

Higher energy prices, particularly for gasoline, were a big reason for inflation’s surge earlier in the year. Stubbornly hot inflation, despite energy costs easing over the last few months, remains a big focus for Wall Street. The Fed and other central banks have been raising interest rates to make borrowing more difficult and slow economic growth, but Wall Street is concerned that the potential solution for high inflation could result in a recession.

Investors are looking for signs that the economy is slowing enough to allow central banks a reason to ease up on rate hikes. Some signs this week included a tamer rate hike by Australia’s central bank and a U.S. report showing that the number of available jobs plummeted in August.

Employment has been a particularly strong area of the economy and any signs that the hot job market is cooling could mean that inflation might follow. Analysts have said such hopes may be premature. A report on U.S. job growth at private employers came in stronger than expected Wednesday, as did a report on the services sector.

Wall Street will get a more detailed look at employment in the U.S. on Friday with the government’s monthly jobs report for September.

The Fed has said it is determined to continue raising interest rates until it is satisfied that inflation is under control. That resolve has been echoed by some central banks globally.

New Zealand’s central bank raised its benchmark interest rate to 3.5%, saying inflation remained too high, most recently at 7.3%, and labor scarce. The half-point rate increase was the fifth in a row by the Reserve Bank of New Zealand since February.

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Yuri Kageyama contributed to this report.

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