Stock markets in the United States experienced a broad decline during trading on Wednesday as investors reassessed economic conditions and inflation prospects. The S&P 500 dropped 0.8% to close at 7,706.03, while the Dow Jones Industrial Average fell 352 points, or 0.7%, to 51,511.59. The Nasdaq composite sank 1.1% to 26,936.04, retreating from recent highs.
The sell-off was triggered by a surge in Treasury yields following an unexpectedly robust economic report released during the morning session. The yield on the 10-year Treasury climbed to 5.10% from 4.96% the previous evening, briefly reaching 5.14% and matching levels not seen since 2007. The sharp rise in yields reflected growing concerns that strong economic growth could fuel persistent inflation, creating a challenging environment for equity valuations and broader borrowing costs across the economy.
A preliminary business activity report showed U.S. economic growth had accelerated to its strongest pace in more than five years, signaling robust demand. However, the same report indicated that costs faced by businesses were rising at their fastest rate in four years, driven partly by elevated energy prices. Economists noted that these cost pressures could be passed along to consumers in subsequent months, further complicating the inflation picture.
Energy markets also reflected ongoing geopolitical tensions affecting supply expectations. Brent crude for November delivery climbed 3.9% to $103.08 per barrel, reversing its recent decline from levels near $110. December-delivery Brent rose 2.8% to $98.12 per barrel. Concerns about Middle East disruptions, stemming from the conflict with Iran, continued to support oil prices, which remained substantially above pre-conflict levels of around $72 per barrel.
Mixed corporate earnings provided limited support to market sentiment. KB Home reported stronger-than-expected quarterly profits but saw its stock decline 3% after management signaled deteriorating industry conditions driven by higher mortgage rates and consumer caution. General Mills similarly beat profit expectations yet declined to raise its full-year guidance due to challenging consumer conditions, though its shares rose 1%. In other markets, stock indexes declined in Hong Kong by 1% and in Shanghai by 0.4%.
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