U.S. equities faced a sharp selloff around midday Wednesday, driven by a surge in oil prices that revived inflation fears and heightened anticipation of the Federal Reserve's policy decision. The Dow Jones Industrial Average plunged approximately 852 points, or 1.61%, while the S&P 500 fell 0.93% and the Nasdaq Composite dropped 1.14%.
Two high-priced Dow components, Caterpillar Inc. (NYSE: CAT) and Goldman Sachs Group Inc. (NYSE: GS), were responsible for about 72% of the index's decline. The Dow is a price-weighted index, meaning stocks with higher share prices exert a disproportionate influence on its movement. Caterpillar fell 6.5%, shedding $54.76 per share, and Goldman Sachs lost 4.6%, or $47.85 per share. Each dollar change in a Dow component represents roughly 5.94 index points, so these two stocks combined contributed about 610 points to the Dow's loss.
The selloff in Caterpillar followed a downgrade by Baird from "Buy" to "Hold," with the broker slashing its price target to $900 from $1,200, citing risks related to data-center investment and regulatory headwinds. The broader market also faced pressure from rising commodity prices, with Brent crude jumping nearly 7% toward $90 a barrel and U.S. crude rising more than 6% to roughly $84. This spike stoked concerns about persistent inflation and its potential impact on corporate margins and consumer spending.
The Federal Reserve's policy statement was due at 2 p.m. EDT, with rate futures pricing in about a 36% probability of a rate increase, up from roughly 31% the previous day. Treasury yields moved higher, with the 10-year note reaching 4.635%, compared with 4.604% on Tuesday. The central bank's decision is widely expected to provide critical guidance on the path of monetary policy amid mixed economic signals.
Technology shares also added to the downward pressure, particularly in the semiconductor space. Nvidia Corporation (NASDAQ: NVDA) declined 2.6%, Advanced Micro Devices Inc. (NASDAQ: AMD) lost 4.4%, and Micron Technology Inc. (NASDAQ: MU) fell 3.7%. The weakness in tech came ahead of major earnings reports from Microsoft Corporation (NASDAQ: MSFT) and Meta Platforms Inc. (NASDAQ: META) after the closing bell. Options markets implied post-earnings moves of 6.6% for Microsoft and 7.8% for Meta, reflecting significant uncertainty. Microsoft's implied swing represented about $190 billion in market value, well above its average implied move of 4.8% over the previous 12 reporting cycles.
Despite the broad selloff, some defensive and oil-sensitive stocks managed to gain. Chevron Corporation (NYSE: CVX) rose about 2.8%, benefiting from the surge in crude prices, while Apple Inc. (NASDAQ: AAPL) edged 0.3% higher. Only about 43% of S&P 500 members advanced, and just 10 of the Dow's 30 components traded in positive territory, underscoring the breadth of the decline.
The risk balance remains two-sided. A surprise rate increase or another oil spike could deepen the selloff, while softer Fed language or strong cloud-computing results from tech giants could reverse the downturn quickly. Wall Street remained open at publication, with all index readings preliminary and no closing prices or after-hours earnings yet released.
