US Stocks Drop As Rising Dollar, Treasury Yields, Oil Prices Weigh On Sentiment: What's Driving Markets Wednesday?

Wednesday is a risk-off session for the U.S. stock market as investors express concern in response to the mounting pressures posed by escalating oil prices and increasing U.S. Treasury yields.

WTI-graded crude rose to over $86 a barrel, while the rate-sensitive two-year Treasury yields showcased an impressive 15-basis-point increase in a day, surging over 5%. The ISM Services PMI surprisingly soared to a six-month high in August, beating expectations, while another service gauge measured by S&P Global showed a dismal picture.

The U.S. dollar also increased further, with the U.S. dollar index rising to the 105 level, the highest since mid-March 2023.

Investors are eagerly anticipating the release of the Fed Beige Book at 2 p.m. to gain further insights into qualitative economic data gathered from Federal Reserve districts.

Cues From Wednesday’s Trading:

On Wednesday, the major stock market indices all registered losses: the S&P 500 fell by 0.9%, the Dow Jones Industrial Average dropped 0.7%, the Nasdaq 100 declined by 1.1%, and the Russell 2000 was down by 0.6%.

US Index Performance On Tuesday

Wednesday Trading In Major US Equity ETFs

• The SPDR S&P 500 ETF Trust SPY was 0.9% lower to $445.38
• The SPDR Dow Jones Industrial Average ETF DIA fell 0.7% to $373.83 
• The Invesco QQQ Trust QQQ fell 1.2% to $373.83, according to Benzinga Pro data.

Looking at S&P 500 sectors:

• All 11 sectors traded lower for the day. The Consumer Staples Select Sector SPDR Fund XLP, fell the least, down 0.1%.  
• The worst performers were the Consumer Discretionary Select Sector SPDR Fund XLY and the Technology Select Sector SPDR Fund XLK, both down 1.5%.

Latest Economic Data:

The Mortgage Bankers Association reported a 2.9% drop in weekly mortgage applications volume for the week ended Aug. 25. The MBA Mortgage Market Index fell to the lowest level since December 1996. The drop came despite the 30-year fixed rate’s fall from 7.31% to 7.21%.

At 2 p.m. EDT, the Fed is scheduled to release the Beige Book report, which comprises anecdotal evidence of economic conditions in the 12 Federal Reserve districts.

Dallas Fed President Lorie Logan will make a public appearance at 3 p.m. EDT.

See also: Futures Vs. Options

Stocks In Focus:

• Lockheed Martin Corp. LMT fell over 4% after the company trimmed the F-35 jet delivery outlook.
• Albemarle Corp. ALB fell 5.5% after the company revised the non-binding bid to $4.3 billion to buy the Australian lithium miner Liontown Resources by the middle of 2024.
• DexCom, Inc. DXCM rose 6.7% after UBS raised the price target from $138 to %175.
Enphase Energy ENPH fell 4% after Morgan Stanley lowered the price target from $234 to $159.
• AeroVironment, Inc. AVAV is rallying following the release of its quarterly results.
• GitLab, Inc. GTLB fell over 5.5% and Zscaler, Inc. ZS slipped more than 1%, also in reaction to earnings reports.
• American Eagle Outfitters, Inc. AEO, C3.ai, Inc. AI, Dave & Buster's Entertainment, Inc. PLAY, GameStop Corp. GME and UiPath, Inc. PATH are among the companies due to release their quarterly results after the market close.

Commodities, Bonds, Other Global Equity Markets:

Crude oil rose 0.9%, with a barrel of WTI-grade crude trading at $87. The United States Oil Fund ETF USO was 0.9% higher to $78.  

Treasury yields were sharply higher, with the 10-year yield up by 11 basis points to 4.3% and the two-year yield up by 15 basis points to 5.03%. 

The dollar rose, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, up 0.2%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.1% lower to 1.0715.

European equity indexes closed in the red. The SPDR DJ Euro STOXX 50 ETF  FEZ fell 1%. 

Gold fell 0.4% to $1,918/oz, while silver tumbled 1.7% to $23.14. Bitcoin BTC/USD was 0.8% lower to $25,567.

Staff writer Piero Cingari updated this report midday Wednesday. 

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