US stocks close lower as elevated Treasury yields weigh on markets

US stocks closed lower Wednesday as elevated Treasury yields weighed on markets and Federal Reserve minutes signaled another interest rate increase would likely be appropriate before year-end.

The Dow Jones industrial average fell 341.41 points, or 0.66%, to 51,179.87.

The S&P 500 declined 17.16 points, or 0.22%, to 7,801.77, retreating from Tuesday's record close. The Nasdaq composite also lost 61.20 points, or 0.22%, to 27,538.69.

The benchmark 10-year Treasury yield stood at 5.286%, up about 1.5 basis points, after reaching 5.365% earlier in the session, its highest level since April 2002.

Yields eased from their intraday highs following a $39 billion auction of 10-year Treasury notes, helping stocks pare earlier losses.

Higher yields increase borrowing costs and can put pressure on equity valuations.

Housing data released Wednesday highlighted the impact of rising borrowing costs.

The average rate on 30-year fixed mortgages climbed to 7.49% in the week ending Oct. 2, its highest level since November 2023, from 7.30% a week earlier, according to the Mortgage Bankers Association.

Mortgage applications fell 4.2% from the previous week.

The association attributed the rise in mortgage rates to higher Treasury yields and widening mortgage spreads amid increased interest rate volatility.

Fed signals further tightening

Minutes of the Fed's Sept. 15-16 meeting, released Wednesday, showed most participants assessed that another rate increase would likely be appropriate by year-end.

Officials emphasized that future decisions would depend on incoming information, the economic outlook and the balance of risks.

The Fed unanimously raised its benchmark rate by 25 basis points to a range of 3.75%-4% at the September meeting.

Many participants judged that financial conditions remained supportive of growth despite higher longer-term Treasury yields.

In other markets, the dollar strengthened against the euro, with the exchange rate falling 0.56% to 1.12.

Gold declined 1.4% to $4,107.50 per ounce, while West Texas Intermediate crude fell 0.54% to $88.96 per barrel.

European stocks close lower

European markets also closed lower amid concerns over France's public finances and geopolitical uncertainty.

The benchmark Stoxx Europe 600 fell 1% to 630.25.

Italy's FTSE MIB dropped 2.51% to 49,972.25, while Germany's DAX declined 1.35% to 25,104.36.

France's CAC 40 lost 1.22% to 7,769.21, and Britain's FTSE 100 fell 0.79% to 10,458.5.

Spain’s IBEX 35 also dropped 1.68% to end at 19,118.