The S&P 500 closed sharply lower Wednesday as surging Treasury yields put the squeeze on stocks amid worries about the economy. 

At 4:00 p.m. ET (20:00 GMT), the Dow Jones Industrial Average fell 817 points, or 1.9%, the S&P 500 index fell 1.6%, and the NASDAQ Composite fell 1.4%. 

Treasury yields surge to pressure sentiment

Treasury yields rose sharply on concerns about economic growth, while a weak demand for the 20-year Treasury auction stoked fresh selling in U.S. sovereign bonds amid fresh signs that the recent knock to investor confidence in the U.S. amid policy uncertainty remain front and center.     

Investors have remained on edge over the U.S. economy after Moody’s downgraded the U.S. credit rating last week, while Congress prepared to vote on a sweeping tax cut bill backed by President Donald Trump.  

On the trade front, investors were holding out for more trade deals between the U.S. and major economies. A host of reports showed high-level talks with Japan are set to resume this week, while negotiations with several other countries are ongoing. 

China added to the risk aversion by warning that the U.S.’ chip export controls threatened to undermine a trade truce reached in Geneva last week. 

Alphabet jumps after product event

Alphabet (NASDAQ:GOOGL) jumped more than 2% on Wednesday, a day after the company unveiled a slew of new AI-related products and initiatives to ensure that it remains competitive in the AI race. 

Microsoft Corporation (NASDAQ:MSFT), meanwhile, was trading below the flatline after announcing that 394,000 windows computers were infected by Lumma malware globally. 

Trump’s tax bill in focus

President Donald Trump’s tax cut and spending bill has apparently run into opposition from several dissenting lawmakers, and faces a critical stress test on Wednesday as Republicans in the U.S. House of Representatives try to overcome internal divisions.

The bill, if approved, could add $3 trillion to $5 trillion to the country’s $36.2 trillion debt load, according to nonpartisan analysts, and comes after Moody’s downgraded its U.S. credit rating by a notch last week over growing national debt.

More retailer earnings in spotlight 

Several major retailer stocks have reported earnings ahead of the open, as the first-quarter earnings season winds down. 

Lowe’s (NYSE:LOW) stock fell after the home improvement chain reported net sales in the first quarter that were roughly in line with estimates, but flagged "near-term uncertainty".

Target (NYSE:TGT) stock fell after the big-box retailer slashed its annual sales forecast after posting a sharp decline in quarterly same-store sales, attributing the declines to weakened consumer confidence and a pullback in discretionary spending.

The figures come against a backdrop of increased tariff tensions that have contributed to gloomy returns and forecasts from a host of consumer-facing companies. This includes big-box retail titan Walmart (NYSE:WMT), which warned last week of impending price hikes.