US Stocks Fall as Treasury Yields Hit 5%

U.S. stock markets declined on Tuesday as investors braced for a Federal Reserve interest rate decision scheduled for Wednesday. The Dow Jones Industrial Average dropped 328 points to 52,093.11, the S&P 500 fell 0.45%, and the Nasdaq composite sank between 0.6% and 0.8%.

Market pressure intensified as the 10-year Treasury yield breached 5% for the first time since 2023, reaching as high as 5.04%. This surge was driven by inflation concerns and geopolitical instability involving Iran, which disrupted oil flows through the Strait of Hormuz and damaged a Saudi pipeline, pushing Brent crude oil prices toward $109. The Federal Reserve System is widely expected to hike the federal funds rate for the first time in three years to combat inflation, a move that potentially opposes the preference of President Donald Trump for rate cuts.

Sector performance was mixed. Consumer-facing stocks, including Chipotle Mexican Grill and Dollar Tree, suffered losses, while Dave & Buster's Entertainment tumbled between 15.3% and 19% following weak quarterly results. Cryptocurrency stocks also fell after the United States Senate blocked a new regulatory framework. In contrast, AI stocks such as Nvidia and Advanced Micro Devices stabilized following a previous global slide, despite a call from Anthropic CEO Dario Amodei for a global slowdown in AI development for safety reasons.