Stock market today: Live updates

Stocks fell on Tuesday as traders looked ahead to the Federal Reserve‘s policy decision this week — which could send ripples through the economy — and as Treasury yields surged to multiyear highs.

The Dow Jones Industrial Average lost 412 points, or 0.8%. The S&P 500 traded down about 0.5%, while the Nasdaq Composite dropped 0.7%.

Losses in the S&P 500 and Nasdaq were mitigated by gains in a number of stocks connected to artificial intelligence, which were under pressure in the prior trading day. Intel jumped 1%, while Coherent and Advanced Micro Devices gained 2%. Qualcomm also advanced 4%.

Tuesday saw the yield on the benchmark 10-year Treasury note rise to its highest since 2007, reaching 5.041%. Bond yields and prices move in opposite directions. The yield later came off its high, trading up more than 3 basis points at 4.996%.

Global bond yields have been in focus for equity markets in recent weeks, with government debt selling off amid mounting fears that the ongoing U.S.-Iran war will fuel inflation and a hawkish turn among central banks.

“Investors are finally catching up with the concerns,” said Melissa Brown, global head of investment decision research at SimCorp. On top of U.S. government debt passing $40 trillion and inflation remaining “stubbornly high,” Brown added that oil prices exceeding $100 per barrel “makes people sit up and take notice.”

Oil prices moved higher after Saudi Arabia shuttered a key pipeline that bypasses the Strait of Hormuz, leading Brent futures to close above $105 per barrel and West Texas Intermediate crude to settle over $101 on Monday. Crude extended gains on Tuesday, with Brent crude oil futures for November delivery rising 3% to trade above $109 a barrel, while WTI futures were up 5% at above $106.

As Treasury yields and oil continue to rise, the Fed’s policy rate decision expected Wednesday is also weighing on traders’ minds. Fed funds futures trading suggests a roughly 90% likelihood that the central bank will lift rates by a quarter point from the current target rate range of 3.5% to 3.75%. That decision could reverberate through the global economy.

“Markets want at least a little bit of guidance so that they can get their head around,” Brown also said. “I think if Warsh were to say, ‘We remain concerned about inflation, and we’ll act accordingly,’ I think that’ll be fine. The concern is that he just doesn’t say anything.”

In a Tuesday note, Barclays strategists said higher rates have already pressured valuations and were increasingly putting equity portfolios at risk.

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“While earnings have so far offset the drag, the approaching 5% threshold in 10Y yields marks a historically important inflection point, beyond which rates have typically become a more persistent headwind for equities,” they said.