Dow ends lower as climb in Treasury yields resumes, oil and dollar rises

By Frances Yue and Isabel Wang

U.S. stocks closed mostly higher Wednesday after a volatile trading session, as investors weighed climbing Treasury yields, the impact of rising oil prices on inflation, the possibility of a government shutdown, an autoworkers strike and resumption of student loan repayments.

How stocks traded

The Dow Jones Industrial Average DJIA closed down 68.61 points or 0.2%, at 33550.27The S&P 500 SPX ended up 0.98 point or 0.02%, to 4274.51The Nasdaq Composite COMP rose 29.24 points or 0.2%, to 13092.85

On Tuesday, the Dow industrials fell 388 points, or 1.14%, to end at 33,619, suffering its largest one-day point and percentage decline since March 22, according to Dow Jones Market Data. The S&P 500 declined 1.5%, to 4,274, while the Nasdaq Composite dropped 1.6%.

What drove markets

The Dow Jones Industrial Average closed lower Wednesday, while off session lows, following positive economic data release from the Commerce Department, which showed orders for long-lasting or durable goods rose a strong-than-expected 0.2% in August and briefly boosted market sentiment in the early morning trade. Economists polled by the Wall Street Journal had forecast a 0.5% decline.

Durable-goods orders minus defense orders actually fell 0.7% last month, but the so-called core orders, which omits defense and transportation and is a proxy for broader business investment, rose 0.9%, the government said.

Such data "reflect a persistent corporate appetite to invest and make money, with business investment rising solidly in August," according to José Torres, senior economist at Interactive Brokers.

Treasury yields have continued to climb, pushing 10-year and 30-year rates to fresh multi-year highs.

Melissa Brown, head of applied research at Axioma, said there's nervousness in the financial markets that the Federal Reserve will still raise interest rates despite cooling inflation, so investors are afraid that policymakers will "mess it up by going too far."

"We've already seen for the past couple of weeks the investor sentiment, particularly in the U.S., has become more negative," Brown told MarketWatch via phone on Wednesday. "...our view is if sentiment is negative, bad news is going to be punished a lot. [If] good news is not [so] good, it's certainly not going to be highly rewarded."

MarketWatch Live Coverage: Government shutdown: Aid for food, housing on the line with 3 days left for deal

Jeffrey J. Roach, chief economist at LPL Financial, said investors should expect a choppy market from the trifecta of a spike in energy prices, the restart of student loan payments, and a looming U.S. government shutdown due impasse over the budget deficit in Congress.

As a result, the Fed may end up being more patient and cautious as it assesses the economy as the unknown economic impact of a government shutdown will likely keep policymakers from altering their interest-rate policy, Roach said in emailed comments. "The current dynamics support our baseline view that a recession could begin by end of year or early next year if consumers pull back spending," he added.

Meanwhile, the U.S. oil benchmark ended at a nearly 13-month high on Wednesday, reviving inflation worries and adding to concerns of tight crude supply amid OPEC+ production cuts, while the dollar reached a new 10-month high.

The CBOE VIX index VIX, Wall Street's so-called fear gauge, briefly hit a four-month high above 19 on Wednesday, before slightly pulling back.

Companies in focus

Shares of Costco Wholesale Corp. COST finished up 1.9% on Wednesday after the warehouse club's earnings topped Wall Street estimates, and the company's chief financial officer said theft has not risen "dramatically" over the past year. Paychex Inc. PAYX closed up 3.4% after the human resources services company reported fiscal first-quarter profit and revenue that rose above expectations, and nudged up its full-year outlook.

-- Jamie Chisholm contributed.

-Frances Yue -Isabel Wang

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09-27-23 1632ET

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