US close: Stocks drop sharply as Treasury yields rise

US stocks declined on Wednesday with all but three stocks on the Dow finishing in the red as investors continued to scale back their appetite for risk ahead of key inflation data later in the week.

“Global equities shuddered at the prospect of interest rates staying higher for longer," said Dan Coatsworth, investment analyst at AJ Bell.

"Despite plenty of earlier signals that central banks were in no rush to cut rates until inflation had fallen further, investors are only now coming to terms with the idea that monetary policy will stay tight for just a bit longer.”

The Dow finished down 1.1% at 38,441.54, falling for the fifth time in the last seven days as it continues to pull back from the 40,000+ level reached on 17 May. The Nasdaq, which hit a new closing high of 17,019.88 on Tuesday, retreated 0.6% to 16,920.58, while the S&P 500 fell 0.7% to 5,266.95, having touched a fresh peak last week.

Bond yields were rising across the US and Europe on Wednesday, sapping the demand for equities, ahead of inflation data from both regions on Friday. The core annual rate of eurozone consumer price inflation is forecast to have risen 10 basis points to 2.8% in May, while the closely watched PCE index is tipped to show that core US inflation held steady at 2.8% in April.

German 10-year bund yields rose to their highest level so far this year after data revealed that Germany's annual inflation rate picked up in May, while the yield on a 10-year US Treasury was up 6.1 basis points at a three-week high of 4.618% by the close on Wall Street.

David Morrison, senior market analyst at Trade Nation, said the US inflation data in particular could lead to some "big market moves" if it significantly misses market expectations.

"Aside from this, there’s little in the calendar. So it shouldn’t be a surprise to see stock indices rangebound until we see the next catalyst for a big move. Perhaps it also shouldn’t be a surprise to see stocks drift lower now and pull back from their record highs as we approach the summer months," he said.

Market movers

Salesforce was among the three stocks on the Dow that finished in positive territory, with shares rising ahead of the enterprise software provider's quarterly results after the bell. Apple and Johnson & Johnson also eked out small gains.

ConocoPhillips fell 3% after announcing the acquisition of Marathon Oil worth $22bn, causing shares in the latter to gain 8%. The acquisition will add "highly complementary" acreage to ConocoPhillips’ existing US onshore portfolio, it said.

Pharma giant Merck inched lower on the news it will buy ophthalmology-focused biotechnology firm EyeBio for up to $3bn, getting its hands on a pipeline of clinical and preclinical candidates for the treatment of retinal diseases.

Retail brokerage Robinhood rose 3% after announcing a $1bn share buyback the previous evening, while carrier American Airlines plummeted 14% after cutting its sales and profit forecasts for the second quarter.

Dow Jones - Risers

Salesforce.Com Inc. (CRM) $271.62 0.66%
Apple Inc. (AAPL) $190.29 0.16%
Johnson & Johnson (JNJ) $144.44 0.04%

Dow Jones - Fallers

Unitedhealth Group Inc. (UNH) $484.39 -3.76%
Walgreens Boots Alliance, Inc. (WBA) $14.89 -3.19%
Intel Corp. (INTC) $30.13 -2.99%
Caterpillar Inc. (CAT) $338.11 -2.41%
Boeing Co. (BA) $171.65 -1.96%
Dow Chemical Co. (DOW) $57.00 -1.79%
McDonald's Corp. (MCD) $249.37 -1.64%
International Business Machines Corporation (CDI) (IBM) $167.05 -1.54%
Walt Disney Co. (DIS) $100.88 -1.52%
Chevron Corp. (CVX) $156.91 -1.35%

S&P 500 - Risers

Marathon Oil Corp. (MRO) $28.68 8.43%
Gap Inc. (GPS) $21.65 6.39%
Universal Health Services Inc. (UHS) $180.17 2.88%
United Airlines Holdings Inc (UAL) $51.83 2.35%
DaVita Inc (DVA) $146.69 2.10%
H&R Block Inc. (HRB) $49.94 2.09%
Take-Two Interactive Software Inc. (TTWO) $159.68 1.84%
McKesson Corp. (MCK) $559.02 1.75%
Western Digital Corp. (WDC) $77.43 1.69%
Leggett & Platt Inc. (LEG) $10.48 1.55%

S&P 500 - Fallers

American Airlines Group (AAL) $11.62 -13.54%
Advance Auto Parts (AAP) $62.47 -10.97%
Nektar Therapeutics (NKTR) $1.38 -8.00%
Valero Energy Corp. (VLO) $155.69 -4.82%
Coty Inc. Class A (COTY) $10.23 -4.58%
Mosaic Company (MOS) $29.78 -4.34%
HF Sinclair Corporation (DINO) $53.63 -4.06%
Southwest Airlines Co. (LUV) $25.51 -3.81%
FMC Corp. (FMC) $60.50 -3.80%
Advanced Micro Devices Inc. (AMD) $165.14 -3.77%

Nasdaq 100 - Risers

Qurate Retail Inc. (QRTEA) $0.74 2.19%
Take-Two Interactive Software Inc. (TTWO) $159.68 1.84%
Western Digital Corp. (WDC) $77.43 1.69%
Ross Stores Inc. (ROST) $139.10 1.06%
T-Mobile Us, Inc. (TMUS) $168.88 0.94%
Monster Beverage Corp (MNST) $52.13 0.93%
Biomarin Pharmaceutical Inc. (BMRN) $75.10 0.89%
Netflix Inc. (NFLX) $654.62 0.87%
Nvidia Corp. (NVDA) $1,148.25 0.81%
Dollar Tree Inc (DLTR) $113.83 0.72%

Nasdaq 100 - Fallers

American Airlines Group (AAL) $11.62 -13.54%
Asml Holdings N.V. (ASML) $957.88 -3.42%
Microchip Technology Inc. (MCHP) $95.56 -3.30%
Walgreens Boots Alliance, Inc. (WBA) $14.89 -3.19%
Illumina Inc. (ILMN) $101.76 -3.11%
Intel Corp. (INTC) $30.13 -2.99%
Liberty Global plc Series A (LBTYA) $15.83 -2.88%
Liberty Global plc Series C (LBTYK) $16.21 -2.76%
Seagate Technology Plc (STX) $94.33 -2.59%
PACCAR Inc. (PCAR) $105.24 -2.51%