S&P 500: US Stocks Slide on Rising Yields, McDonald’s E. Coli News

S&P 500 Falls as Treasury Yields Rise, McDonald’s and Coca-Cola Drag Dow

The S&P 500 dropped 0.4% on Wednesday, extending its losing streak to a third consecutive day. Rising Treasury yields continued to weigh on equities, with the benchmark 10-year Treasury note yield climbing 3 basis points to 4.23%, the highest level since July. The Nasdaq Composite also fell, losing 0.8%, while the Dow Jones Industrial Average dropped 178 points, or nearly 0.4%.

McDonald’s shares led the Dow’s decline, plunging over 5% after the Centers for Disease Control and Prevention (CDC) linked an E. coli outbreak to the fast-food chain’s Quarter Pounder burgers. The outbreak has resulted in ten hospitalizations and one death. Coca-Cola also contributed to the Dow’s losses, sliding 2% despite reporting strong third-quarter earnings.

Treasury Yields and Federal Reserve Uncertainty

Treasury yields have become a major headwind for equities, as the 10-year note yield rose to 4.23%. Higher yields typically hurt stocks by raising borrowing costs and making bonds more appealing relative to riskier assets like equities. Despite the Federal Reserve cutting rates earlier this year, resilient economic data and concerns over the growing federal deficit have pushed yields higher.

There is growing uncertainty among traders regarding the Fed’s future actions. While the Fed had previously signaled another 50 basis points of rate cuts by year-end, the rise in yields and persistent strength in the economy may force central bankers to reconsider or delay further easing.

Sector Analysis

The broader market saw a mix of performance across sectors. Consumer discretionary led declines, with the sector down 0.82%, as McDonald’s news heavily impacted sentiment. Consumer staples also fell, down 0.28%, dragged by Coca-Cola’s 2% dip. The energy sector lost 0.47%, pressured by slightly lower oil prices.

On the positive side, financials and real estate showed resilience. Financials gained 0.03%, reflecting continued strength despite rising yields. The real estate sector, which is typically sensitive to interest rates, rose 0.5%, benefiting from a defensive shift as investors sought stable returns. Utilities also climbed 0.23%, another defensive play amid market uncertainty.

Weak Housing Market as Sales Hit 14-Year Low

The U.S. housing market showed further signs of weakness in August, as existing home sales hit their lowest level since 2014, according to the National Association of Realtors. Sales fell to an annualized rate of 3.86 million, down 2.5% from July and 4.2% compared to a year ago. This marks the lowest level of sales since October 2010.

Despite the slowdown in sales, home prices continue to climb. The median sale price reached $416,700, up 3.1% from the prior year. However, affordability remains a significant issue, with first-time buyers making up only 26% of all purchases, tied for the lowest level on record.

Microsoft Faces Price Target Cut

Microsoft was another notable stock in focus as Citi lowered its price target for the tech giant from $500 to $497 ahead of its fiscal first-quarter earnings. Analyst Tyler Radke cited concerns over slowing earnings-per-share (EPS) growth and the company’s elevated capital expenditures as reasons for the revision. However, Radke also noted that the reduced expectations could serve as a “clearing event,” positioning the stock for future gains, particularly with anticipated reacceleration in Azure’s growth in the second half of the fiscal year.

Market Forecast: Cautious Outlook Amid Rising Yields

In the short term, rising Treasury yields are expected to continue putting pressure on equities, particularly in rate-sensitive sectors like technology and consumer discretionary.

Defensive sectors such as utilities and real estate may offer more stability as traders seek safety amid bond market volatility.

The Fed’s next moves will be critical, and without clear signs of easing monetary policy, markets could remain under pressure, with a bearish tilt likely in the near term.