The S&P 500 fell 0.4%. The Dow Jones Industrial Average was down 506 points, or 1%, as of 10:30 a.m. Eastern time, and the Nasdaq composite was 0.6% lower.
They felt pressure as the yield on the 10-year Treasury, which is the centerpiece of the U.S. bond market, climbed to 5.01% from 4.97% late Monday. It's been jumping to its highest level in years, and Monday was the first time it breached the 5% level since 2023.
Higher yields mean everyone from the U.S. government to households to businesses must pay more in interest to borrow money, which slows the overall economy. They also make people less willing to pay high prices for stocks because they can earn more from sitting in bonds, which are considered safer investments.
“The result is a market that must work harder to generate earnings growth just as investors become less willing to pay premium valuations for that growth,” according to Darrell Cronk, president of Wells Fargo Investment Institute.
The last time the 10-year yield was consistently above 5% was around the turn of the millennium, and it's been a long march back since bottoming out below 0.50% in 2020. It's picked up speed since February, after the war with Iran sent oil prices much higher.
That raised worries about high inflation potentially lasting for years, which are layering on top of longstanding concerns about the U.S. government’s massive debt level and other issues.
Oil prices rose further Tuesday following several sharp swings in the morning. The price for a barrel of Brent crude, the international standard, climbed 1.7% to $107.49 after flipping between $105.10 and $108.43 earlier in the day.
