U.S. stock markets ended Wednesday on a down note, unable to maintain the momentum from Tuesday's rebound driven by dovish remarks from the Bank of Japan.

The S&P 500 closed 0.8% lower, the Nasdaq dropped 1.2% and the Dow Jones declined by 234 points or 0.6%.

Small-caps, as tracked by the iShares Russell 2000 ETF (NYSE:IWM), were the hardest hit, down 1.4%, as investors continue to assess the U.S. economic outlook.

What Drove Wednesday's Wall Street Decline?

Investors showed little interest in the 10-year U.S. bond auction, resulting in a yield of 3.9%, notably higher than the pre-auction estimate.

This weaker-than-anticipated demand suggests the recent rally might have peaked. Additionally, treasuries faced pressure as 17 leading companies issued $31.8 billion in debt, marking the largest amount of U.S. investment-grade issuance this year, according to Bloomberg data.

Investors are still anticipating a more significant 50-basis-point rate cut by the Federal Reserve in September, with expectations of more than 100 basis points of total rate reductions for the year.

Market-implied probabilities for a 50-basis-point cut in September remain at about 70%, slightly up from Tuesday's 68%.

According to the CME Group's FedWatch tool, traders are assigning almost a 60% probability that the federal funds rate will end the year at 4.25-4.5%, with the remaining 40% chance placed on it being in the lower range of 4%-4.25%.

Wednesday's Movers At The Close

The three major stock gainers in the S&P 500, as monitored by the SPDR S&P 500 ETF Trust (NYSE:SPY), were the following companies:

Major laggards were:

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Bear market illustration generated using artificial intelligence via Dall-E.