U.S. equities closed lower for a third consecutive session on Wednesday, pressured by climbing crude prices and a jump in Treasury yields following Treasury Secretary Bessent's announcement of an expanded bond repurchase program. The Dow Jones Industrial Average fell 405.41 points, or 0.77%, to 52,380.66, while the S&P 500 declined 0.48% to end at 7,636.36. The Nasdaq Composite shed 168.07 points, or 0.64%, closing at 26,253.34.
Most of the so-called "Magnificent Seven" tech giants finished in the red. Alphabet dropped more than 2%, Amazon fell over 1%, and Nvidia, Apple, Microsoft, and Tesla all posted modest losses. Meta bucked the trend with a gain exceeding 6%. Memory chip makers advanced, with SK Hynix surging over 7%, Micron Technology climbing more than 2%, and SanDisk gaining over 1%. Optical communications stocks also rose, as Marvell Technology added more than 4% and Lumentum increased over 1%.
Treasury yields spiked after the Treasury Department said it would triple the size of its buyback operations for long-term government bonds to $6 billion. This follows last month's announcement that the government debt repurchase program would be at least doubled. Following the news, the 10-year Treasury yield climbed to 4.857%, marking its highest level since November 2023. The yield had already briefly breached the closely watched 4.8% level, driven by concerns that rising oil prices could fuel inflation.
Despite the increased buyback plan, yields continued their ascent, as some on Wall Street had anticipated a larger program from Treasury Secretary Scott Bessent. Peter Boockvar of The Boock Report noted that certain market participants had expected buybacks as high as $7 billion or $8 billion. Although stocks remained under pressure on Wednesday, Thomas Martin of Globalt Investments pointed out that while worries over higher oil prices and interest rates have intensified, the market has "held up fairly well," adding that it has not yet experienced a correction since earlier this year.
"When you look at stock market sentiment, it's at extreme levels. At the same time, sentiment regarding higher rates is also at an extreme," said the senior portfolio manager at the firm. "These two things shouldn't be able to coexist for long." Oil prices touched triple digits for the first time in over a month amid an escalating U.S.-Iran conflict, following an American military strike on five Iranian oil tankers. International benchmark Brent crude futures settled 3.36% higher at $101.21 per barrel, while U.S. West Texas Intermediate futures climbed 3.25% to close at $96.05. Both posted their highest closing prices since May.
Concerns over prolonged energy supply disruptions due to a potential war in the Strait of Hormuz have intensified bets that the Federal Reserve will raise interest rates next week. According to CME data, traders now see a 60% probability of a 25-basis-point rate hike this month, up slightly from the previous day.
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