U.S. Stocks Sell Off as Rates Resume Their Climb

U.S. stock indexes dropped sharply Wednesday, and the S&P 500 was on pace for its worst day since April, as interest rates resumed their climb.

Treasury yields have jumped over the last week, which has weighed on stocks around the world, and the 10-year yield resumed its climb Wednesday to once again approach its highest level in seven years.

The rise in rates is weighing particularly heavily on areas of the market that had earlier been the biggest winners, and technology stocks had some of the morning’s steepest losses.

KEEPING SCORE: The S&P 500 was down 40 points, or 1.4 percent, at 2,840 as of 11:30 a.m. Eastern time. It’s on pace for its fifth straight decline and is close to its lowest level in two months.

The Dow Jones industrial average lost 386, or 1.5 percent, to 26,043; and the Nasdaq composite dropped 167, or 2.2 percent, to 7,570.

WINNERS AREN’T WINNING: Tech stocks and companies that sell non-essentials to consumers have been some of the top performers over the last year, nearly doubling the performance of the S&P 500. They’ve also dropped more than the rest of the market so far this month.

Tech stocks in the S&P 500 fell 2.7 percent Wednesday for the steepest loss among the 11 sectors that make up the index. Companies that sell non-essentials to consumers dropped 1.9 percent.

YIELDS: The biggest driver for the market over the last week has been interest rates, which began spurting higher following several encouraging reports on the economy. Higher rates can slow economic growth, erode corporate profits and make investors less willing to pay high prices for stocks.

The 10-year Treasury yield rose to 3.21 percent from 3.20 percent late Tuesday after earlier touching 3.24 percent. It was at just 3.05 percent early last week. The two-year yield rose to 2.88 percent from 2.87 percent, and the 30-year yield climbed to 3.38 percent from 3.37 percent.

INFLATION WATCH: U.S. wholesale prices rose 0.2 percent in September from the prior month, matching economists’ expectations. The Labor Department said its index of producer prices has climbed 2.6 percent over the last 12 months, the smallest increase since January.

Economists noticed some increasing trends in the data, and inflation has crept higher this year, but there are few signs yet of rapid acceleration. That’s good news for markets: If inflation were to spike, it would push the Federal Reserve to get more aggressive in raising interest rates.

SEARED: Sears Holdings nosedived after the Wall Street Journal reported that the struggling retailer hired an advisory firm to prepare a bankruptcy filing that could come within days. The stock fell 38.5 percent to 36 cents in morning trading. It was more than $40 five years ago.

Sears has closed hundreds of stores and sold several famous brands or put them on the block as it sees more customers abandon its stores.

MARKETS ABROAD: Japan’s Nikkei 225 added 0.2 percent, South Korea’s Kospi dropped 1.1 percent and the Hang Seng in Hong Kong gained 0.1 percent.

The CAC 40 in France dropped 2.1 percent, Germany’s DAX lost 2.1 percent and the FTSE 100 in London fell 1.2 percent.

Stocks from emerging markets were also hard hit. Investors see many of these countries as being vulnerable to higher U.S. interest rates, which can pull away investment dollars. Brazil’s Bovespa lost 2 percent.

COMMODITIES: Benchmark U.S. crude oil fell $1.77 to $73.19 per barrel. Brent crude, the international standard, lost $1.60 to $83.40.

Gold was up 20 cents to $1,191.70 per ounce.

CURRENCIES: The dollar fell to 112.67 Japanese yen from 113.05 yen late Tuesday. The euro rose to $1.1527 from $1.1496, and the British pound rose to $1.3195 from $1.3146.