US stocks finished lower Tuesday as a jump in oil prices, rising Treasury yields, and renewed concerns about artificial-intelligence spending pushed investors toward a more defensive stance ahead of the Federal Reserve's policy decision.
The Dow Jones Industrial Average fell 429.96 points, or 0.82%, to 51,991.24. The S&P 500 dropped 0.47% to 7,583.95, while the Nasdaq Composite declined 0.78% to 25,982.25, according to Reuters.
Treasury Yield Breaks Above 5%
The benchmark 10-year US Treasury yield briefly climbed above 5% and reached roughly 5.04% during Tuesday trading, marking its highest level since 2007, according to market data and Reuters reports.
The move came as investors positioned for Wednesday's Federal Reserve decision. Markets were assigning a 92.3% probability to a 25-basis-point rate increase, sharply higher than the 33.1% probability seen a month earlier, Reuters reported.
Higher long-term borrowing costs are particularly important for companies carrying significant debt, while higher Treasury yields can also put pressure on equity valuations.
Oil Climbs Above $100
Oil remained one of the biggest drivers of Tuesday's market action.
Brent crude traded above $107 a barrel during the session and reached around $108.73, while WTI climbed to approximately $105.32, according to market reports.
The latest advance followed additional attacks involving Saudi Arabian energy infrastructure and continued tensions around key Middle East shipping routes. Reuters said the supply concerns were contributing to renewed inflation worries.
The energy sector benefited from the move, with S&P 500 energy stocks rising 2.3%, while consumer discretionary shares suffered the largest sector decline.
AI Stocks Remain Under Pressure
Technology shares continued to face pressure after a sharp selloff in semiconductor stocks on Monday.
The Philadelphia Semiconductor Index had plunged 5.9% in the previous session amid concerns about the sustainability and risks surrounding the rapid expansion of AI spending. The index recovered only 0.3% Tuesday, according to Reuters.
The combination of higher financing costs and questions surrounding future AI investment has increased sensitivity around highly valued technology companies.
Bitcoin Weakness Hits Crypto Stocks
Bitcoin also came under pressure as investors reduced exposure to riskier assets.
Bitcoin fell about 2.4% to roughly $76,400 during Tuesday trading and briefly touched $75,560, its lowest level since Aug. 20, according to MarketWatch.
The decline weighed on crypto-linked equities. Coinbase Global Inc. (COIN) fell about 6.1%, while Strategy Inc. (MSTR) dropped roughly 3.4%, according to MarketWatch.
The sector is also facing additional uncertainty ahead of a Senate procedural vote on the CLARITY Act.
Stocks Making Big Moves
Dave & Buster's Entertainment Inc. (PLAY) plunged 19.6% after the company reported second-quarter revenue below expectations, Reuters reported.
Waystar Holding Corp. (WAY) moved 7.3% higher after Reuters reported that the healthcare software company was evaluating strategic options that could include a sale.
Market Breadth Signals Broad Selling
The decline was not limited to a handful of major companies.
On the New York Stock Exchange, declining stocks outnumbered advancers by 2.47 to 1. There were 97 new 52-week highs compared with 539 new lows.
The Nasdaq showed a similar pattern, with 3,281 declining stocks against 1,413 advancers. The exchange recorded 40 new 52-week highs and 239 new lows, according to Reuters.
What Comes Next
Wednesday's Federal Reserve decision is now the market's central focus.
Investors will be watching the rate decision itself as well as the Fed's assessment of inflation, oil price pressures, and the path for borrowing costs. With the 10-year Treasury yield around the 5% threshold and crude remaining above $100, markets are entering the decision with considerably less room for disappointment.