US stocks took a tumble on Wednesday as a surge in Treasury yields left investors feeling uneasy about the future of interest rates. The benchmark S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all saw significant declines, with the S&P 500 falling 0.7%, the Dow Jones dropping 0.9%, and the Nasdaq sliding over 0.7%.
The spike in US bond yields came after a government debt auction failed to meet expectations, leading to concerns that the Federal Reserve may keep rates higher for a longer period. The yield on five-year Treasurys reached near four-week highs, while the 10-year yield surpassed the key 4.5% level and continued to inch up to around 4.57% on Wednesday.
Investors were also grappling with the implications of Tuesday’s stronger-than-expected consumer confidence data on Fed policy making. Despite hopes for a pivot to rate cuts, investors were bracing for a prolonged wait following warnings from Fed officials.
In the midst of these uncertainties, American Airlines announced a significant cut to its earnings outlook, causing its stock to plummet over 13%. The airline now expects earnings per share in a range of $1 to $1.15 for the current quarter, down from previous guidance of $1.15 to $1.45. Total revenue per available seat is also projected to decline by 5% to 6% compared to the previous year.
The outlook for demand in the airlines industry appeared strong, with record-breaking travel numbers reported by the TSA. Despite this, American Airlines cited increased domestic competition and a loss of corporate share as reasons for its revised forecast.
As investors await further economic data, including the release of the Fed’s Beige Book and Friday’s reading on PCE inflation, the market remains on edge as they try to navigate the shifting landscape of interest rates and economic indicators.
