The major averages finished broadly lower on Wednesday as a sharp increase in Treasury yields and another rise in crude oil weighed on the market, while semiconductor and mega-cap growth stocks gave back some of their strong gains from earlier in the week. The S&P 500 (-0.8%), Nasdaq Composite (-1.1%), and DJIA (-0.7%) ended with sizable losses, while weakness was more pronounced in the Russell 2000 (-1.8%). The S&P Mid Cap 400 (-0.6%) held up comparatively well.

Treasury yields were a major source of pressure throughout the session, with selling accelerating after preliminary September PMI data pointed to stronger business activity. The S&P Global U.S. Services PMI increased to 58.7 from 56.5 in August, while the Manufacturing PMI climbed to 57.0 from 53.9. The stronger readings reinforced expectations that additional monetary policy tightening could be needed and helped send yields sharply higher across the curve. Fed Governor Michael Barr (voting FOMC member) added to that pressure by saying his baseline is that further policy adjustments will likely be needed to ensure inflation returns to target in a timely fashion.

Rate-hike expectations moved accordingly, with the probability of a 25-basis-point increase to 4.00-4.25% at the October FOMC meeting rising to 66.4% from 55.4% yesterday, according to the CME FedWatch Tool. Pressure on Treasuries was compounded later in the session by relatively weak dollar demand and foreign participation in the $70 billion 5-year note auction, while the continued rise in crude oil provided another inflation-related headwind. The 2-year note yield climbed 14 basis points to 4.89% after reaching 4.94% intraday, while the 10-year note yield jumped 14 basis points to 5.11% after touching 5.13%.

The rise in rates weighed heavily on some of the market's recent leaders. The PHLX Semiconductor Index fell 1.2% following two exceptional sessions to begin the week, contributing to a 0.7% decline in the information technology sector. Mega-cap growth stocks also pulled back, leaving the Vanguard Mega Cap Growth ETF down 0.9%. Meta Platforms (META 744.10, +7.50, +1.02%) was a notable exception to that weakness, remaining higher amid continued enthusiasm surrounding its Muse AI agent. The stock's gain was not enough to prevent the communication services sector (-1.9%) from finishing among the day's weakest groups, however. Rate-sensitive areas faced some of the most pronounced selling pressure.

The utilities (-1.9%) and real estate (-1.5%) sectors finished sharply lower as Treasury yields surged, while the iShares U.S. Home Construction ETF dropped 2.5%. The consumer discretionary sector (-1.6%) was another notable laggard as higher interest rates and energy costs compounded several stock-specific concerns. Expedia Group (EXPE 259.04, -21.66, -7.72%) and Airbnb (ABNB 149.58, -12.23, -7.56%) suffered sizable losses amid worries that META's Muse AI agent could disrupt established online travel platforms.

McDonald's (MCD 238.35, -12.00, -4.79%) also finished among the day's weaker names after falling to a new 52-week low following the unveiling of its McDonald's > NEXT strategy. Investors reacted negatively to the plan's sizable spending commitments and lengthy timeline as the company contends with slowing U.S. comparable sales and weaker traffic.

Crude oil added another layer of pressure to the broader market, with WTI settling $1.94 higher (+2.1%) at $92.46 per barrel as a U.S.-Iran truce remained elusive. The move provided a clear benefit to energy stocks, leaving the energy sector (+0.9%) as the day's standout performer.

Selling was widespread beneath the major averages, with decliners outpacing advancers by more than 3-to-1 on both the NYSE and Nasdaq. Fewer than half of S&P 500 components are now trading above their 200-day moving averages, underscoring the deterioration in participation even after the strong technology-led start to the week.

Wednesday's retreat ultimately reflected renewed pressure from several of the market's most persistent macro headwinds. Stronger economic data and hawkish Fed commentary pushed Treasury yields sharply higher, rising crude oil added to inflation concerns, and recent semiconductor and mega-cap leaders pulled back. Those pressures extended well beyond technology, with pronounced weakness in small-cap and rate-sensitive stocks contributing to the broad nature of the decline.

• Nasdaq Composite: +15.9% YTD
• Russell 2000: +14.4% YTD
• S&P 500: +12.6% YTD
• S&P Mid Cap 400: +10.5% YTD
• DJIA: +7.2% YTD

Reviewing today's data:

• 09/19 MBA Mortgage Applications Index -1.5%; prior -4.1%
• September S&P Global U.S. Manufacturing PMI - Prelim 57.0; prior 53.9
• September S&P Global U.S. Services PMI - Prelim 58.7; prior 56.5