U.S. stocks retreated on Tuesday as investors turned cautious on the eve of the Federal Reserve’s closely watched policy decision and a surge in Treasury yields rattled the market. All three major indexes finished in the red, with the pullback led by rate-sensitive corners of the market. The yield on the benchmark 10-year Treasury note climbed to its highest level since 2007, touching 5.04%, as traders braced for the possibility that the Fed could raise interest rates for the first time since 2023 when it wraps up its two-day meeting on Wednesday.
What Moved Markets
The Dow Jones Industrial Average fell 321.91 points, or 0.61%, to close at 52,099.29. The S&P 500 slipped 34.25 points, or 0.45%, to end at 7,585.73, while the tech-heavy Nasdaq Composite dropped 204.84 points, or 0.78%, to finish at 25,981.57.
The main driver was the jump in bond yields, which raises borrowing costs across the economy and makes future corporate profits look less attractive. Recent data pointing to sticky inflation has shifted expectations toward a rate hike, a sharp reversal from the cuts markets had grown used to. A spike in oil prices added to the inflation worries and pressured sentiment. With the Fed’s announcement due Wednesday afternoon, many investors chose to step to the sidelines rather than make big bets ahead of the decision.
Notable Movers
Losses were cushioned by strength in several artificial-intelligence-linked names. Qualcomm (QCOM) advanced more than 4%, Advanced Micro Devices (AMD) gained about 2%, and Coherent (COHR) added nearly 2% as demand for AI chips and infrastructure stayed firm.
Skyworks Solutions (SWKS) was a standout, surging roughly 10% amid optimism over the semiconductor company’s pending $22 billion merger with Qorvo and tailwinds from Apple’s latest product announcements. Dell Technologies (DELL) climbed 5.65% on continued demand for its AI-optimized servers and a reported $95 billion order backlog.
Not everyone shared in the gains. Enova International (ENVA) tumbled 24.24% after the fintech firm withdrew its bank regulatory applications to acquire Grasshopper Bancorp, a setback for its expansion plans. The steep drop made Enova one of the worst performers on the day.
Looking Ahead
All eyes are on Wednesday’s Federal Reserve decision, which could set the tone for markets into the fall. Investors will be watching not just whether the central bank raises rates, but the language in its statement and Chair comments about the path ahead. With Treasury yields at their highest in nearly two decades and oil prices climbing, the inflation picture remains front and center. Retail investors should keep an eye on how the bond market reacts to the Fed’s move, since further increases in yields could keep pressure on stocks, particularly high-growth technology shares.