U.S. stocks and bonds suffered a wave of selling after America’s credit downgrade, sending Treasury yields to the highest levels of the year and major indexes toward their worst session in months. The S&P 500 fell 1.4%, while the tech-heavy Nasdaq Composite lost 2.2%, its worst one-day performance since February. The Dow Jones Industrial Average shed 348 points, or 1%, dragged down by shares of Intel and Microsoft. The declines followed a global selloff in markets in Europe and Asia.

The yield on the 10-year Treasury note rose to 4.077%, its highest level since November, as bond prices fell. Wednesday’s declines put a dent in a steady ascent for major indexes that has continued for much of 2023, pulling U.S. stocks to some of the highest levels of the past year and driving a boom in speculative bets on everything from artificial intelligence to meme stocks. Investors turned more cautious after the downgrade and a recent stretch of earnings results, and some portfolio managers said they were wary about how much higher major indexes could climb. Rising bond yields shift the calculus for many investors deciding where to park their cash at a time when the S&P 500 has rallied almost 18% this year.

“Now that you have that additional pressure from higher yields, that could make for a tougher setup here for the weeks to come,” said Adam Phillips, managing director at EP Wealth Advisors, who said he is cautious on stocks in coming months. The declines across the market Wednesday show how the 2023 investing playbook has been rapidly upended in recent months. At the start of the year, many investors believed that risks on the economic horizon could constrain Treasury yields. Instead, a stretch of strong economic data, debt sales and the U.S. downgrade have driven yields higher.

Following the resolution of the spring’s debt-ceiling standoff, investors are expecting billions of dollars of incremental additions to the size of the Treasury market as the government increases its borrowing. That expected increase in the supply of Treasury securities may be weighing on prices, which pushes up yields. “That’s what’s really driving things,” said Matthew Tym, managing director at Cantor Fitzgerald, of the move in Treasury yields. The yield on 30-year Treasurys climbed to 4.164% Wednesday, the highest close of the year.

Of course, some investors said they weren’t worried about the country’s creditworthiness despite the downgrade. Jamie Dimon, the chief executive of JPMorgan Chase, said Fitch’s downgrade of the U.S. credit rating shouldn’t be too concerning to investors and that the U.S. is home to the “best economy the world’s ever seen.” Investors have also been sifting through a wave of earnings results in recent weeks, many of which have come in better than expected. Still, a selloff in chip maker Advanced Micro Devices shares on Wednesday underscored how high the bar is for earnings season after the stock-market rally.

AMD reported second-quarter sales and earnings that topped Wall Street estimates on Tuesday afternoon. But investors were evidently looking for more: AMD shares were down 7% on Wednesday. That followed disappointing results last month from peers Taiwan Semiconductor Manufacturing and Texas Instruments. Wednesday’s declines put a dent in a steady ascent for major stock indexes this year.

The technology behemoths that have propelled the market higher were some of the hardest hit in trading Wednesday. These stocks tend to be especially sensitive to rising bond yields. Nvidia shares dropped 4.8%, while Micron Technology shed 3.7%. Apple and Amazon.com report earnings on Thursday, giving investors the next big read on how tech heavyweights fared this earnings season.

Some investors said that major indexes were due for a pullback after a historically calm stretch. It has been 112 days since the S&P 500 notched a one-day decline of at least 2%, the longest since February 2020, according to Dow Jones Market Data. “There’s definitely a complacency,” said Eric Metz, chief investment officer at SpiderRock Advisors. He said that the rising stock market had crimped demand for insurance-like protection through the options market, driving prices of such contracts sharply lower in recent weeks.