Oil Prices Send Stocks Reeling Amid Inflation Fears

Wall Street stocks closed lower on Tuesday as rising oil prices and bond yields added to inflation worries. The Standard & Poor's 500 index fell 0.7%, the Dow Jones industrial average dropped 0.8%, and the Nasdaq composite slid 1%. These losses follow a shaky but mostly positive month for Wall Street, with every major index notching monthly gains in August.

The ongoing sell-off in U.S. government bonds has been putting pressure on stocks. The yield on the 10-year Treasury rose to 4.79% from 4.75% late Monday, while the yield on the 2-year Treasury increased to 4.39% from 4.34%. Rising yields signal that investors are demanding a higher return from Treasury bonds due to growing government debt.

The U.S. debt surpassed $40 trillion two weeks ago, with defense costs and interest on the burgeoning deficit making up an enormous share of federal spending. Higher yields on bonds indicate higher borrowing costs on mortgages and other loans, weighing down investments and making it more difficult for businesses to expand.