SynopsisIn a turbulent day for Wall Street, the markets faced declines primarily driven by disappointing performances from Alphabet and Amazon, compounded by increasing Treasury yields. Meanwhile, a spike in oil prices ensued following Iran's President's remarks at the UN, impacting overall market sentiment.

Despite this, US business activity surged to remarkable levels, raising speculation about possible interest rate hikes by the Federal Reserve. ReutersWall Street ended lower on Wednesday, pulled down by Alphabet and Amazon, as Treasury yields climbed and Iran's president said Tehran would never surrender to US pressure.

Oil prices rose almost 4% and the S&P 500 energy sector index rallied after Iranian President Masoud Pezeshkian's speech at the UN, a day after US President Donald Trump warned he could "annihilate" Iran. A survey showed US business activity raced to a more than five-year high in September, pushing government bond yields higher and raising expectations the Federal Reserve will increase interest rates at its October meeting.

Yields on two-year Treasuries touched their highest since 2024, while 10-year Treasury yields hit their highest since 2007." The stock market wants a resolution to the (Middle East) conflict, and if we don't get that, we will have higher rates for longer, and that's going to continue to weigh on the equity market," said Lauren Cassidy, chief investment officer at Founders 100 ETF in Dallas.

Meta Platforms added to big gains this week following a strong reception of its " Muse" AI assistant, which analysts say could benefit tech infrastructure stocks, while challenging banks, online shopping platforms and other consumer businesses. Google parent Alphabet dropped, as did Amazon , which has blocked Muse from its shopping platform.

The PHLX chip index slid, with Nvidia losing ground. Expedia and Airbnb also declined.

The Nasdaq recorded record-high closes in the previous two sessions as Wall Street remained optimistic about AI-related companies. The S&P 500 is less than 2% below its record high close on August 13.

US President Donald Trump welcomes Chinese President Xi Jinping to Washington on Wednesday for a three-day visit. The agenda includes extending the trade truce reached last year between the two superpowers, AI regulation and US arms sales to Taiwan.

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The S&P 500 is trading just under 19 times expected earnings, its lowest valuation since 2023, according to LSEG data. AI-related heavyweights are responsible for much of the recent increase in earnings expectations.