Stocks close lower: Russell 2000 falls 1.3%, S&P 500 down 0.2%, 10-year yield 5.28%

U.S. stocks finished lower Wednesday, with the smallest companies hit hardest. On Yahoo Finance closing prices, the S&P 500 fell 0.22% to 7,801.77, the Dow Jones Industrial Average lost 341.41 points, or 0.66%, to 51,179.87, and the Nasdaq Composite slipped 0.22% to 27,538.69. The Russell 2000 dropped 1.31% to 2,793.20, its second straight decline.

Yields hit a 24-year high, then backed off

CNBC reported that the 10-year Treasury yield reached 5.35% during the session, its highest since 2002, before a solid auction of $39 billion in 10-year notes pulled it back. Indirect bidders, a group that includes foreign central banks, took 80.3% of the sale against a 10-auction average of 72.4%, and dealers were left with just 2.5% against a 9.4% average. The auction yield of 5.3% was still the highest since 2000.

On the Treasury's official curve, the close was nearly unchanged from Tuesday: the 10-year at 5.28% (5.27% a day earlier), the 2-year at 4.77% (4.79%) and the 30-year at 5.67% (5.64%). So the damage to stocks came from the scare and the level of rates, not from a big move in the closing numbers. CNBC noted the 10-year has risen 60 basis points since the end of July. The 30-year auction of $22 billion comes Thursday.

Why small caps lagged

The Russell 2000 is the index most exposed to borrowing costs, because smaller companies carry more floating-rate debt and have less cash to wait out high rates. It has now fallen on both days this week while the S&P 500 was up on Tuesday. The Fed's September minutes, which we covered in our minutes story, said most participants saw another hike as likely by year end, without saying when. The next meeting is October 27-28.

Oil slips on the IEA move

CNBC reported that Brent settled at $100.20 a barrel, down 38 cents, and West Texas Intermediate fell $1.16 to $88.28, after International Energy Agency members agreed to prioritize releasing diesel stocks. IEA director Fatih Birol said about 100 million barrels remain unreleased under the March plan. Prices had been higher earlier after Houthi strikes on Saudi Arabia and renewed tanker attacks near Hormuz. See our crude oil chart.

Also moving

Gold futures fell about 1.2% on Yahoo Finance data, and our markets board showed the dollar index up 0.44% at about 101.96 after the close. Separately, HousingWire reported that HUD opened a Fair Housing Act investigation into Wells Fargo's mortgage programs for Black borrowers; we have no confirmed market move to attach to it.

What is next

Initial jobless claims arrive Thursday (forecast 200,000 against 197,000 previously), then September CPI on October 14. See our economic calendar.

Sources: Yahoo Finance closing prices, U.S. Treasury, CNBC, HousingWire, Federal Reserve, Chronicle markets board. Index closes may be revised by the exchanges. This is market information, not investment advice.