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US stocks ended lower on Tuesday as Treasury yields climbed to fresh multiyear highs, while investors assessed the outlook for interest rates ahead of key inflation and labour market data.
The Dow Jones Industrial Average fell 136 points, or 0.26%, to 51,345.41.
The S&P 500 declined 0.14% to 7,672.57, while the Nasdaq Composite slipped 0.08% to 26,802.66.
The decline came after stocks also fell sharply on Monday, with the Dow losing more than 300 points and the S&P 500 and Nasdaq Composite dropping 0.8% and 0.9%, respectively.
Treasury yields hit multiyear highs
Longer-dated Treasury yields continued to rise on Tuesday.
The 30-year Treasury yield reached 5.621%, its highest level since June 2002, while the benchmark 10-year Treasury yield climbed to 5.293%, its highest since June 2007.
The 10-year yield was up about four basis points during the session. The two-year Treasury yield, meanwhile, rose to 4.96%.
The bond-market selloff has added pressure to equities by increasing borrowing costs and making fixed-income assets more attractive relative to stocks.
Higher yields can also weigh on corporate earnings by raising the cost of capital.
Persistent inflation, strong economic activity and expectations for additional Federal Reserve rate hikes have contributed to the rise in yields.
However, Treasury yields eased from their session highs after New York Fed President John Williams indicated that policymakers could take time to assess incoming economic data before deciding on another rate increase.
Market expectations for at least a 25-basis-point Fed rate hike at the October meeting declined to 51.5%, according to CME FedWatch, from nearly 70% earlier in the session.
Economic data keeps Fed outlook in focus
Investors are awaiting several key economic reports this week that could influence expectations for monetary policy.
The Commerce Department is scheduled to release the Personal Consumption Expenditures Price Index on Wednesday.
Labour market data will follow throughout the week, culminating in Friday’s government payrolls report.
The latest Job Openings and Labor Turnover Survey showed that US job openings fell by 256,000 to 7.079 million in August, below economists’ estimate of 7.225 million.
Separately, the Conference Board reported that US consumer confidence fell to a nearly 12-and-a-half-year low in September.
Households expect business and labour market conditions to deteriorate over the next six months amid the Iran war and higher interest rates.
Federal Reserve officials have offered differing views on the path ahead.
Williams has indicated that policymakers have time to assess the data, while Governor Michael Barr said further rate increases are likely to be needed.
Chicago Fed President Austan Goolsbee also warned about allowing inflation to remain above the central bank’s target.
AI stocks and individual movers
AI-related stocks remained in focus as Anthropic’s IPO prospectus highlighted rapid growth alongside wider losses.
The company is targeting a valuation above $2 trillion, potentially providing a benchmark for valuations of major AI companies.
Meta shares advanced even after OpenAI unveiled its always-on Dots AI agents, which are designed to pursue user goals across applications and compete with Meta’s Muse.
Elsewhere, used-car retailer CarMax gained after reporting higher second-quarter profit and revenue, helped by pricing and used-car sales.
Fair Isaac shares fell sharply after Federal Housing Finance Agency Director Bill Pulte said Fannie Mae and Freddie Mac would move to a single pricing grid.
The S&P 500 and Dow were down 0.3% and 3.7%, respectively, in September, while the Nasdaq remained up more than 1% for the month.
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