By Lisa Pauline Mattackal, Purvi Agarwal and Carolina Mandl
(Reuters) -Wall Street closed lower on Wednesday, as climbing Treasury yields pressured megacap stocks and investors grew less confident about strong rate cuts from the Federal Reserve, while corporate news pressured McDonald's (NYSE:MCD) and Coca-Cola (NYSE:KO).
Benchmark 10-year U.S. Treasury yields reached a three-month high with investors reassessing the Fed rate-cut outlook over the next few months against the backdrop of strong economic data and the upcoming presidential election.
"The market is struggling to digest this latest backup in yields," said Adam Turnquist, chief technical strategist for LPL Financial, adding higher rates are pressuring stocks.
Among rate-sensitive megacaps, Nvidia fell 2.81%, Apple (NASDAQ:AAPL) 2.16%, Meta Platforms 3.15% and Amazon (NASDAQ:AMZN) slid 2.63%, dragging on the tech-laden Nasdaq.
Out of the 11 S&P sub sectors, only utilities and real estate posted gains.
The Dow Jones Industrial Average fell 409.94 points, or 0.96%, to 42,514.95, the S&P 500 lost 53.78 points, or 0.92%, to 5,797.42 and the Nasdaq Composite lost 296.47 points, or 1.60%, to 18,276.65.
McDonald's tumbled 5.12% after an E. coli infection linked to its Quarter Pounder hamburgers killed one and sickened many. Coca-Cola fell 2.07% after the company reiterated its annual profit growth forecast even though it expected higher revenue.
The broader consumer discretionary sector also dropped 1.82%, while the information technology was down 1.68%.
"You have a market that had gotten up to new all time highs so portfolio managers are looking around and saying: maybe I should take some profits," said Thomas Martin, senior portfolio manager, Globalt Investments.
Boeing (NYSE:BA) dropped 1.76% after the planemaker reported a quarterly loss of $6 billion owing to a crippling strike. Factory workers at Boeing will vote later in the day on a new contract proposal that could end the standoff after more than five weeks.
Semiconductor company Texas Instruments (NASDAQ:TXN) gained 4% after its third-quarter profit beat forecasts, while AT&T (NYSE:T) rose 4.60% after gaining more wireless subscribers than expected in the third quarter.
Tesla (NASDAQ:TSLA), the first of the so-called Magnificent Seven companies scheduled to report results after market close, closed down, but gained 8% in after hours trading, as it beats profit margin estimates.
The benchmark S&P 500 had its third consecutive daily decline.
U.S. markets are near record-high levels, but a combination of earnings, a changing monetary policy outlook and the upcoming presidential election will test the rally and could stoke volatility, analysts said.
Richmond Fed President Thomas Barkin said the central bank's fight to return inflation to its 2% target may take longer than expected, limiting interest rate cuts.
The Fed "Beige Book" survey showed U.S. economic activity was little changed from September through early October while firms saw an uptick in hiring.
Declining issues outnumbered advancers by a 3.27-to-1 ratio on the NYSE. There were 102 new highs and 59 new lows on the NYSE.
The S&P 500 posted 28 new 52-week highs and 4 new lows while the Nasdaq Composite recorded 60 new highs and 90 new lows.
Volume on U.S. exchanges was 11.83 billion shares, compared with the 11.29 billion average for the full session over the last 20 trading days.