U.S. stocks moved lower on Tuesday as rising Treasury yields pressured equities and oil prices resumed their advance.
Investors also assessed signs of possible diplomatic progress between the United States and Iran, although concerns over energy-driven inflation remained strong.
S&P 500, Nasdaq and Dow Move Lower
At 11:29 ET, the S&P 500 fell 0.5% to 7,585.15, while the Nasdaq Composite declined 0.7% to 26,004.76.
The Dow Jones Industrial Average dropped 0.9% to 51,957.24.
Technology stocks recovered slightly from the previous session’s decline. That earlier weakness had been driven by renewed concerns over artificial intelligence after several leading industry executives called for a slower pace of AI development.
Oil Prices Resume Their Rally
Oil prices climbed again after surging on Monday following Saudi Arabia’s decision to shut its critical east-west pipeline.
The route is especially important because it serves as an alternative to the Strait of Hormuz, where oil flows have already been heavily disrupted.
Crude prices had briefly eased after U.S. President Donald Trump said he was open to the possibility of reaching an agreement with Iran.
However, oil markets remained supported by uncertainty over Saudi supply.
Saudi Pipeline Damage Keeps Supply Risks Elevated
The 1,200-kilometer Saudi pipeline could remain offline for three to five weeks while repairs are completed.
Damage reportedly affected an important pumping station.
Partial operations may continue during the repair period, although the amount of oil that could flow through the pipeline remains unclear.
Since late August, the pipeline had been transporting roughly 2.6 million to 4 million barrels per day.
A prolonged shutdown could disrupt as much as 4% of global oil supply, according to market estimates.
10-Year Treasury Yield Hits Highest Since 2007
Higher oil prices have added to fears that inflation could remain elevated.
Those concerns pushed government bond yields higher, with the benchmark 10-year U.S. Treasury yield reaching its highest level since 2007.
Rising yields tend to pressure stocks because they increase borrowing costs and make bonds more attractive compared with equities.
Higher discount rates can also reduce the present value of future corporate earnings.
Fed Rate Hike Odds Rise to 92%
Investors are also preparing for the Federal Reserve’s latest policy decision.
Markets now see roughly a 92% probability of a 25-basis-point rate hike, according to CME data.
That compares with around 59% one week earlier.
A rate increase would reinforce expectations that the Fed is willing to respond aggressively to persistent inflation.
Fed Decision Could Drive the Next Market Move
The potential rate hike could also create political tension.
President Donald Trump has repeatedly called for lower interest rates to support economic growth.
Fed Chair Kevin Warsh could therefore face increased scrutiny if the central bank raises rates.
Markets will closely watch whether policymakers confirm expectations for tighter financial conditions or push back against them.
The Fed’s message could influence the next major move across stocks, bonds, currencies and gold.
UBS Says Stocks Can Remain Resilient
Although higher interest rates can weigh on stock valuations, some analysts remain relatively optimistic.
UBS noted that U.S. equities have historically remained resilient after the first Fed rate hike in a tightening cycle.
The bank argued that strong corporate earnings can offset some of the pressure caused by higher borrowing costs.
If economic growth remains solid, earnings could continue supporting equities even as interest rates rise.
