Wall Street dips as Treasury yields resume uptrend

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(Reuters) -Wall Street’s main indexes slipped in choppy trading on Wednesday as Treasury yields rose modestly, while investors awaited developments on a U.S. funding bill and inflation data this week to gauge the Federal Reserve’s monetary policy outlook.

The 10-year Treasury yields reversed course to scale a fresh 16-year high, weighing on megacap growth stocks including Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Tesla (NASDAQ:TSLA) and Amazon.com (NASDAQ:AMZN), down between 0.5% and 1.3%.

The energy sector was the top performer among the major S&P 500 sectors, with an over 2% advance on a surge in crude oil prices that remains as a threat to inflation.

Also adding pressure was data showing orders for long-lasting U.S. manufactured goods unexpectedly rose in August and signs of business spending on equipment regaining some momentum.

“Concern is that the economy is still doing okay, but we need to see some weakness to give interest rates a reason to peak and so far, we’re not seeing that,” said Paul Nolte, market strategist at Murphy & Sylvest Wealth Management.

At 12:17 p.m. ET, the Dow Jones Industrial Average was down 194.92 points, or 0.58%, at 33,423.96, the S&P 500 was down 19.96 points, or 0.47%, at 4,253.57, and the Nasdaq Composite was down 52.34 points, or 0.40%, at 13,011.27.

However, the small-cap Russell 2000 index outperformed the benchmark indexes with a 0.9% jump.

The S&P 500 and the Nasdaq are set for their worst monthly showing so far this year, with investors wrestling with the prospects for a long period of high interest rates and an economic fallout.

All the three indexes, including the Dow, are eyeing their first quarterly decline in 2023.

“In order to get a better equity market, we need to see equity prices go down even more to provide some good value that investors can step into,” Nolte added.

For the rest of the week, investors will monitor second-quarter GDP and the monthly personal consumption expenditures price index data, along with Federal Reserve Chair Jerome Powell’s remarks.

Traders’ bets on the benchmark rate remaining unchanged in November and December stood around 74% and 59%, respectively, according to CME’s FedWatch tool. Meanwhile, a 25-basis-point rate cut is being priced in as early as March, growing to over 31% in June and July.

Meanwhile, the U.S. Senate on Tuesday took a step forward on a bipartisan bill to stop a government shutdown on Sunday, while the House sought to push ahead with a Republican-backed measure. Wall Street’s top regulator told U.S. lawmakers that a shutdown would reduce his agency’s staffing to “skeletal” levels.

Costco Wholesale (NASDAQ:COST) gained 1.2% after posting better-than-expected quarterly revenue and profit on Tuesday.

Mattel (NASDAQ:MAT) rose 3.5% after Morgan Stanley initiated coverage on shares of the maker of Uno playing cards with an “overweight” rating.

Advancing issues outnumbered decliners by a 1.02-to-1 ratio on the NYSE and 1.15-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week high and 43 new lows, while the Nasdaq recorded 24 new highs and 179 new lows.