Wall Street closed sharply lower on Wednesday, pulled down by tech and discretionary stocks. Rising treasury yields continued to spook investors about the pace of Fed rate cuts. The three most widely followed indexes closed the session in the red.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) ticked down 409.94 points, or 1%, to close at 42,514.95. Twenty-six components of the 30-stock index ended in negative territory, while four ended in positive.

The tech-heavy Nasdaq Composite fell 296.47 points, or 1.6%, to close at 18,276.65.

The S&P 500 declined 53.78 points, or 0.9%, to close at 5,797.42. Nine of the 11 broad sectors of the benchmark index closed in the red. The Consumer Discretionary Select Sector SPDR (XLY), the Technology Select Sector SPDR (XLK) and the Communication Services Select Sector SPDR (XLC) fell 1.6%, 1.4% and 0.8%, respectively, while the Real Estate Select Sector SPDR (XLRE) rose 1%.

The fear-gauge CBOE Volatility Index (VIX) increased 5.7% to 19.24. A total of 11.8 billion shares were traded on Wednesday, higher than the last 20-session average of 11.3 billion. Decliners outnumbered advancers by a 3.27-to-1 ratio on the NYSE while the Nasdaq Composite recorded 60 new highs and 90 new lows.

Investors Remain Concerned About High Interest Rates

Treasury yields continued to rise on Wednesday, with the benchmark 10-year yield closing at its highest level in three months. The 10-year yield ended the day at 4.24%, up from 4.204% in the previous session. This was the highest daily settlement for the benchmark yield since July 25.

Strong economic data in recent weeks have led to rising yields, and market participants are currently under the impression that the Fed would cut interest rates much more slowly than investors were betting on a couple of months ago. In fact, on Wednesday, Richmond Fed president Thomas Barkin said in an interview with Reuters that the central bank's target to limit inflation at 2% might take longer than expected to complete and limit how far interest rates can be cut. This indicates that investors would remain apprehensive about the pace of rate cuts.

The presidential election campaign also has a palpable impact on investor mood. Investors generally believe that budget deficits are likely to be larger if one party has control of both Congress and the presidency. In such an uncertain environment, mega-cap growth stocks like tech and not so essential goods like discretionaries take a hit. This was the case on Wednesday.

Consequently, shares of NVIDIA Corporation NVDA and Apple Inc. AAPL lost 2.8% and 2.2%, respectively. Both currently carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.