Dow Drops 352 Points as Inflation Worries Rise

Pressure from the US bond market hit a new level on Wall Street after a surprisingly strong report on the economy raised worries about inflation, while oil prices halted their slide. The squeeze caused US stocks to sink Wednesday.

• The S&P 500 fell 58.61 points, or 0.8%, to 7,706.03.
• The Dow Jones Industrial Average fell 352.10 points, or 0.7%, to 51,511.59.
• The Nasdaq composite fell 308.24 points, or 1.1%, to 26,936.04.

Stocks wilted after the yield on the 10-year Treasury jumped to 5.10% from 4.96% late Tuesday, which is a considerable move for the bond market, the AP reports. High yields undercut prices for stocks and other investments, while also slowing the economy by making it more expensive for everyone to borrow money.

Wednesday's jump sent the 10-year yield back to where it was in 2007, before the global financial crisis caused yields to crater. Yields have been climbing steadily since bottoming out in the COVID pandemic, and they've accelerated recently because of worries about high inflation, the US government's big debt, and other concerns. Worries about inflation got a jolt Wednesday morning after a preliminary report suggested growth in US business activity surged to its strongest level in more than five years. That's an encouraging signal, to be sure, but it also indicates the economy may have plenty of fuel for more inflation.

• The report also suggested costs for businesses are leaping at the fastest rate in four years, in part because of more expensive oil, according to Chris Williamson, chief business economist at S&P Global Market Intelligence. That could mean businesses will pass those higher costs onto their customers in coming months.
• Fuel prices are high because oil is expensive due to worries that the war with Iran will keep oil bottled up in the Middle East for a long time. The price for a barrel of Brent oil to be delivered in November rose 3.5% to $102.78 after climbing as high as $103.12 earlier on Wednesday. That reversed a decline for Brent, which had been falling since it neared $110 last week. Talks are continuing with mediators between US and Iranian officials, but nothing concrete has come from it yet.

• On Wall Street, KB Home became the latest company to deliver a stronger profit for the latest quarter than analysts expected. But its stock nevertheless swung between losses and gains after the homebuilder's executive chairman said conditions got even tougher for the industry over the last three months. It finished with a loss of 3%. Potential customers are becoming more cautious because of higher mortgage rates caused by the rise in the 10-year Treasury yield. They are also feeling pressure from "geopolitical uncertainty and broader economic headwinds," Jeffrey Mezger said.
• General Mills likewise reported a stronger profit for the latest quarter than analysts expected. But the company behind the Cheerios and Progresso brands said it also expects growth this fiscal year to fall below its historical track record "driven by a continued challenging consumer backdrop," and it did not raise its forecast for profit over the full fiscal year. Its stock flipped between gains and losses before rising 1%.