A rise in the key 10-year Treasury rate is being watched closely by Wall Street as yields have climbed to the highest levels since 2014. Oil prices reversed an early slide. A rise in yields makes borrowing cash more expensive. The Nasdaq lost 64 points, or 0.9%, to hit 7,401.
The Standard & Poor's 500-stock index dropped a tad more than 1 percent Tuesday, closing at 2,822. If yields keep rising at this pace, the broader equity market could be in trouble, said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. "Many people have been waiting for it to dip as it's marched higher and higher, and we finally had two days of weakness, particularly yesterday". This comes after the Federal Reserve did not adjust interest rates, even though Janet Yellen said inflation is likely to rise this year.
Declining issues outnumbered advancing ones on the NYSE by a 4.65-to-1 ratio; on Nasdaq, a 2.16-to-1 ratio favored decliners.
Fourth-quarter earnings for the S&P 500 are now seen growing 13.2 percent, up from 12 percent at the beginning of the year, according to Thomson Reuters data.
The Dow opened with a 261-point leap on Wednesday, then gave up all those gains and more, then bounced back into the green to finish up 73.
Tillerson, Mattis Meet with Qatari Officials Amid Tensions in Persian Gulf
More so, both the USA and Qatari officials signed three memorandums of understanding on security cooperation and other issues. They are "sending the message that America cares about this and the crisis needs to be resolved", she added.
BIG DECLINER: Juniper Networks slumped 9.5 percent after the provider of network equipment forecast quarterly results that were well below what Wall Street analysts expected.
S&P 500 measures the performance of 500 widely held common stocks of large-cap USA companies. Import prices dropped 1.6 per cent and export prices declined by 3 per cent for the quarter.
Bond yields also rose, reflecting last year's three United States interest rate hikes.
US Treasury yields were at multi-year highs, extending gains from last week on the back of strong economic data and as investors braced for major central banks to step back from ultra-easy monetary policies.
The VIX, Wall Street's fear gauge, has soared about 35% this week to the highest level since August. Higher yields have made bonds more attractive as investment alternatives to stocks. The Japanese yen strengthened 0.17 per cent versus the greenback at 108.79 per dollar.
MARKETS OVERSEAS: Germany's DAX fell 0.2 percent, while France's CAC 40 gained less than 0.1 percent. On Tuesday, the sector fell 2.1 percent.
Earlier, Hong Kong's Hang Seng rose 0.9% to cap off its best month since April 2015. And the S&P 500 broke a record streak without consecutive drops of 0.5%.