Wall Street ends lower as Russell 2000, Nasdaq lead declines amid rising Treasury yields

All five major U.S. stock gauges finished in negative territory Wednesday. The small-cap Russell 2000 posted the steepest drop at 1.77%, while the Nasdaq Composite retreated 1.13%.

Bond market movements drove much of the session's action. The 10-year Treasury yield jumped 14.09 basis points to 5.1079%. The flash September U.S. composite PMI rose to 58.4 from 56.0 in August, reinforcing signs of solid economic growth and persistent inflationary pressures. Fed Governor Michael Barr indicated that additional rate increases will probably be necessary. Those factors kept equities under pressure.

U.S. stock indices declined, led by the small-cap Russell 2000

• Dow Industrial Average: 51,517.16, down 352.04 points or 0.68%
• S&P 500: 7,706.40, down 58.23 points or 0.75%
• Nasdaq Composite: 26,936.04, down 308.24 points or 1.13%
• Russell 2000: 2,838.6660, down 51.2528 points or 1.77%
• Nasdaq 100: 30,470.29, down 262.10 points or 0.85%

Treasury yields rise sharply as the market prices in an October hike

Treasury yields moved significantly higher as traders factored in a Fed rate increase in October. The implied probability stood at 66% after climbing to 74% during the session. The meeting is scheduled for late October, just ahead of the November elections.

• 2-year: 4.8931%, up 11.61 basis points
• 5-year: 4.9920%, up 15.00 basis points
• 10-year: 5.1079%, up 14.09 basis points
• 30-year: 5.3967%, up 9.37 basis points

Higher yields provide bondholders with better returns while increasing borrowing expenses for companies and households. They can also reduce the present-day appeal of future earnings for growth stocks. That does not guarantee every equity will decline when yields rise, but the bond market's Wednesday move made the task harder for stock buyers.

Winners and losers

Despite the broad market drop, several stocks posted notable gains. Palo Alto Networks added 5.00%, CrowdStrike rose 4.97%, Palantir advanced 3.71%, Fortinet gained 2.57%, and Cadence Design Systems increased 2.03%. Those advances indicate that buyers remained willing to pick select technology names even as the Nasdaq lost ground.

On the downside, Airbnb slid 7.56%, Chewy fell 5.62%, Alaska Air dropped 5.27%, Booking declined 5.07%, and McDonald's lost 4.80%. Alibaba ADRs slipped 4.76%, First Solar retreated 4.39%, and Best Buy shed 4.25%. Those individual stock losses were much larger than the S&P 500's 0.75% decline. The provided movers list does not point to a common reason for each move.

Oil rises; metals and Bitcoin fall

Crude oil's quoted price increased $1.98, or 2.19%, to $92.50. Higher energy costs remain an inflation worry, as fuel expenses can ripple through transportation, agriculture and other sectors. Gold lost 1.73% to $4,284.24, silver fell 3.93% to $64.391, and Bitcoin dropped 1.98% to $84,495.

A lesson for traders

A declining index does not mean all stocks are dropping. On Wednesday, several technology shares posted solid gains even as the Nasdaq Composite ended lower. Start with the overall market direction, then check whether a given stock shows enough strength to buck the trend. That relative strength can be a useful signal, but buyers still need the price to hold its gains.