Wall Street back to May after big drop

Mixed profit reports, increase in bond yields pressure stocks

NEW YORK — Wall Street fell sharply Wednesday, dropping back to where it was in May, after rising bond yields tightened their chokehold and some of the market’s most influential companies turned in mixed profit reports.

The S&P 500 tumbled

1.4 percent for its eighth drop in the past 10 days.

Some of the heaviest losses hit Big Tech stocks, which dragged the Nasdaq composite to its second-worst drop of the year, at 2.4 percent. The Dow Jones Industrial Average fell 105 points, or 0.3 percent.

Putting heavy pressure on the stock market was a rise in Treasury yields.

The 10-year yield climbed to 4.94 percent from 4.82 percent late Tuesday, which helped to send the large majority of stocks on Wall Street lower.

Rapidly rising yields have been knocking the stock market lower since the summer. The 10-year yield has been catching up to the Federal Reserve’s main interest rate, which is above 5.25 percent and at its highest level since 2001 as the central bank tries to get inflation under control.

The 10-year yield this week hit its highest level above 5 percent since 2007, and high yields knock down prices for stocks and other investments while slowing the overall economy.

All told, the S&P 500 fell 60.91 points to 4,186.77.

The Dow dropped 105.45 to 33,035.93, and the Nasdaq sank 318.65 to 12,821.22.

Many investors have been hoping the Fed will cut rates to allow the system more oxygen. But they’ve had to push out such predictions after repeated reports showing the job market remains remarkably solid. Such strength has kept the economy out of a recession but could be adding upward pressure on inflation.

Investors banking on rate cuts may be depending on a playbook that has become obsolete, said Bryant Vancronkhite, senior portfolio manager at Allspring Global Investments.

For decades, the Fed has come to the rescue of markets and the economy whenever trouble arose by quickly cutting interest rates. That is because high inflation was not a problem. But with the trend of globalization retreating and other long-term swings pushing upward on inflation, Vancronkhite said the Fed has to worry about more than just propping up the job market.

“Their focus is going to be on inflation first, economy second, in my mind,” he said.