(Updates prices to late afternoon, adds analyst comments)
* Indexes down: Dow 0.15%, S&P 500 0.19%, Nasdaq 0.30%
* Stocks pare losses, chips and software reverse course
* Akamai Technologies down after announcing senior notes offering
* Yields rally after slight dip in early trading
By Sinéad Carew and Ragini Mathur
May 19 (Reuters) – Wall Street’s main indexes fell on Tuesday as the benchmark 10-year Treasury yield climbed to its highest level in more than a year on mounting inflation concerns as oil prices stayed elevated and investors considered the possibility of Federal Reserve interest rate hikes.
While they pared earlier losses, the S&P 500 and the technology-heavy Nasdaq were still on track for their third straight day of declines as investors took profits after a steep rally that started in late March. While Brent crude futures dipped 1.4%, they were still above $110 a barrel as traders monitored the latest communications about the Middle East war which has all but closed the Strait of Hormuz, a crucial energy conduit. After announcing on Monday that he had held off on a planned military strike against Iran scheduled for Tuesday, due to a new proposal from Tehran to end the Iran war, U.S. President Donald Trump said on Tuesday that the U.S. may need to strike Iran again but that Iran was begging for a deal.
U.S. Vice President JD Vance said the U.S. and Iran have made a lot of progress in their talks and that neither side wants to see a resumption of the military campaign.
Meanwhile, with inflation expectations rising, the 10-year Treasury yield surged, in its third day of gains, to 4.687%, its highest level since January 2025. After paring gains it was still around 4.65%.
“One hundred percent of the story is yields,” said Ben Sullivan, chief investment officer at AE Wealth Management. “It’s an expectation of higher for longer inflation … investors, admittedly, are just starting to capitulate to the idea that we may be in this a lot longer than we thought, and oil may stay stickier a lot longer than we thought. What you’re getting is a natural healthy selloff and an acknowledgement of that.” Meanwhile, traders have started to price in higher probabilities for rate hikes from the Federal Reserve. The latest bets on a 25-basis-point increase in rates for December this year rose to 40% probability while the probability for a 50-basis-point hike was near 14%, up from 4.7% a week ago, according to CME Group’s FedWatch tool. On Wednesday, investors will focus on minutes from the Fed’s last policy meeting for clues on the extent of policymakers’ support for pivoting to a neutral stance from an easing bias.
At 2:14 p.m. EDT, the Dow Jones Industrial Average fell 73.61 points, or 0.15%, to 49,612.51, the S&P 500 lost 13.59 points, or 0.19%, to 7,389.12 and the Nasdaq Composite lost 79.54 points, or 0.30%, to 26,011.19.
Six of the 11 major S&P 500 sectors were lower, with communications services and consumer discretionary the biggest drags on the benchmark index. Higher yields often put pressure on shares of high-growth companies because their valuations depend heavily on future profit expectations.
After outperforming earlier in the session, software stocks reversed course to lose ground, with the S&P 500 software index down 1%, after gaining almost 2% earlier in the day. Conversely, the Philadelphia Semiconductor Index was up about 1.4% after falling more than 3% earlier in the day.
Defensive Healthcare was leading sector gains, rising 1.2%. Among individual stocks, cloud firm Akamai Technologies fell 2.8% after announcing a $2.6 billion convertible bond offering.
Investors are waiting for earnings from AI chip leader Nvidia, due on Wednesday. Results from the world’s most valuable company will be closely watched for evidence AI-driven demand is strong enough to justify elevated valuations across semiconductors.
Declining issues outnumbered advancers by a 2.04-to-1 ratio on the NYSE, where there were 106 new highs and 196 new lows. On the Nasdaq, 1,883 stocks rose and 2,803 fell as declining issues outnumbered advancers by a 1.49-to-1 ratio. The S&P 500 posted 16 new 52-week highs and 21 new lows while the Nasdaq Composite recorded 43 new highs and 155 new lows. (Reporting by Sinéad Carew in New York, Ragini Mathur and Utkarsh Hathi in Bengaluru; Editing by Devika Syamnath and Matthew Lewis)
