Paychex dropped 8.8% after the HR and payroll services provider said that its largest segment missed first-quarter revenue estimates.
Declining stocks outnumbered rising ones within the S&P 500 by a 1.9-to-one ratio.
The S&P 500 posted 14 new highs and 33 new lows; the Nasdaq recorded 41 new highs and 186 new lows.
Indexes fall as traders price in higher rates
US President Donald Trump welcomes Chinese President Xi Jinping to Washington on Wednesday for a three-day visit. The agenda includes extending the trade truce reached last year between the two superpowers, AI regulation and US arms sales to Taiwan.
The S&P 500 declined 0.75% to end the session at 7,706.05 points.
The Nasdaq declined 1.13% to 26,936.04 points, while the Dow Jones Industrial Average declined 0.68% to 51,511.59 points.
Nine of the 11 S&P 500 sector indexes declined, led lower by utilities, down 1.72%, followed by a 1.49% loss in communication services.
Volume on U.S. exchanges was relatively heavy, with 17.0 billion shares traded, compared to an average of 16.5 billion shares over the previous 20 sessions.
The S&P 500 is trading just under 19 times expected earnings, its lowest valuation since 2023, according to LSEG data. AI-related heavyweights are responsible for much of the recent increase in earnings expectations.
Markets also parsed comments from Federal Reserve Governor Michael Barr, who said the central bank will likely need to deliver further interest rate hikes as inflation remains north of the Fed's 2% target.
Traders are now pricing in a 71% chance that the Fed will raise interest rates at its policy meeting next month, the CME Group's FedWatch Tool showed.
AI optimism cools travel and megacap tech stocks
Meta Platforms rose 1%, bringing its gain this week to 12% following a strong reception of its "Muse" AI assistant, which analysts say could benefit tech infrastructure stocks, while challenging banks, online shopping platforms and other consumer businesses.
Google parent Alphabet fell 3.8%. Amazon, which has blocked Muse from its shopping platform, dropped 2.2%.
The PHLX chip index dropped 1.2%, with Nvidia down 1.5%.
Expedia and Airbnb both fell more than 7%.
The Nasdaq recorded record-high closes in the previous two sessions as Wall Street remained optimistic about AI-related companies. The S&P 500 is less than 2% below its record high close on August 13.
Wall Street ends lower as yields climb and oil rises
Wall Street ended lower on Wednesday, pulled down by Alphabet and Amazon, as Treasury yields climbed and Iran's president said Tehran would never surrender to US pressure.
Oil prices rose almost 4% and the S&P 500 energy sector index rallied after Iranian President Masoud Pezeshkian's speech at the UN, a day after US President Donald Trump warned he could "annihilate" Iran.
A survey showed US business activity raced to a more than five-year high in September, pushing government bond yields higher and raising expectations the Federal Reserve will increase interest rates at its October meeting.
Yields on 2-year Treasuries touched their highest since 2024, while 10-year Treasury yields hit their highest since 2007.
"The stock market wants a resolution to the (Middle East) conflict, and if we don't get that, we will have higher rates for longer, and that's going to continue to weigh on the equity market," said Lauren Cassidy, chief investment officer at Founders 100 ETF in Dallas.
SPY•
