U.S. stocks extended their losses on Tuesday as rising Treasury yields continued to weigh on investor sentiment, with the Dow Jones Industrial Average falling for a second straight session. The Dow dropped 131.59 points, or 0.26%, to close at 51,349.92, while the S&P 500 slipped 0.16% to 7,670.84. The Nasdaq Composite also edged down 0.09% to finish at 26,797.54, leaving all three major indexes lower for consecutive sessions.

The pressure intensified in the bond market as Treasury yields climbed to fresh multiyear highs. The 30-year Treasury yield moved above 5.6%, reaching its highest level since June 2002, while the benchmark 10-year Treasury yield rose above 5.29% during the session. Higher bond yields can make equities less attractive to investors and have increasingly become a source of pressure for U.S. stocks.

Banking stocks were also caught in the sell-off, with JPMorgan Chase, Morgan Stanley and Bank of America all closing lower. The weakness came a day after the Dow plunged more than 300 points, while the S&P 500 and Nasdaq fell 0.8% and 0.9%, respectively. Rising oil prices alongside higher Treasury yields have added to concerns across financial markets.

Jeff Klingelhofer, managing director and portfolio manager at Aristotle Pacific Capital, told CNBC that markets appear to be pricing in expectations that inflation will ease alongside weaker demand. He said the shift in market expectations is contributing to the decline in equities and the rise in interest rates. The latest moves highlight how closely investors are watching inflation, economic demand and the direction of U.S. monetary policy.

The latest declines leave U.S. stocks facing a mixed end to September and the third quarter. The S&P 500 is down 0.2% in September, while the Dow has fallen 3.5%, putting the blue-chip index on course to end a five-month winning streak. The Nasdaq, however, has gained more than 1% for the month. For the third quarter, both the S&P 500 and Nasdaq are up about 2%, while the Dow is down nearly 2%.

source: cnbc