US stocks fell for a second consecutive session on Tuesday, as investors braced for the Federal Reserve's interest rate decision on Wednesday. Market sentiment was also shaped by reactions to an AI safety article authored by Anthropic CEO Dario Amodei, while Treasury yields surged to multi-year highs.

The Dow Jones Industrial Average dropped 328.09 points, or 0.63%, to close at 52,093.10. The S&P 500 lost 34.25 points, or 0.45%, to finish at 7,585.73. The Nasdaq Composite declined 204.84 points, or 0.78%, settling at 25,981.57.

Performance among the "Magnificent Seven" tech giants was mixed. Meta and Nvidia posted modest gains, while Amazon fell more than 2%. Alphabet and Microsoft each dropped over 1%, and Apple alongside Tesla recorded slight losses.

In other notable moves, Coherent advanced nearly 2%, Advanced Micro Devices gained 2%, and Qualcomm climbed more than 4%. Cryptocurrency-linked equities broadly declined, with Circle plunging over 11%, Coinbase falling more than 10%, and Bitmine dropping over 8%. Strategy shed more than 5%, while Robinhood lost over 3%.

Oil stocks rallied across the board. Devon Energy and ConocoPhillips each gained over 3%, while Occidental Petroleum, Chevron, and Exxon Mobil all added more than 2%. Halliburton rose nearly 2%. Shares of SoftBank Group (ADR) surged over 9%.

In the bond market, the benchmark 10-year Treasury yield climbed to 5.041% on Tuesday, its highest level since 2007. Bond yields move inversely to prices. The yield later retreated from those highs, last up more than 3 basis points at 5.00%. Global bond yields have become a focal point for equity investors in recent weeks, amid a selloff in government debt driven by growing concerns that the ongoing US-Iran conflict could fuel inflation, alongside a more hawkish tilt from central banks.

"Investors are finally confronting these worries," said Melissa Brown, global head of investment decision research at SimCorp. Beyond the US government debt surpassing $40 trillion and inflation remaining "stubbornly high," Brown added that oil prices breaking above $100 per barrel "has captured everyone's attention."

Oil prices strengthened after Saudi Arabia shut down a key pipeline that bypasses the Strait of Hormuz. On Monday, Brent crude futures settled above $105 per barrel, while West Texas Intermediate (WTI) closed above $101. On Tuesday, crude extended gains, with November-delivery Brent futures rising nearly 3% to close at $108.75 per barrel. WTI futures climbed more than 4% to $105.83.

With Treasury yields and oil prices on the rise, attention also turned to the Fed's policy rate announcement expected Wednesday. Federal funds futures trading indicated a probability of over 94% that the central bank will raise its target rate by 25 basis points from the current range of 3.5% to 3.75%. This decision could have significant ripple effects across the global economy.

"The market is hoping for at least some guidance to make sense of things," Brown also noted. "If they say, 'We're still worried about inflation and will act accordingly,' that's fine. What's worrying is if they say nothing."

Strategists at Barclays noted in a Tuesday report that higher interest rates are already pressuring valuations and increasingly posing risks to equity portfolios. "While earnings have offset the drag so far, the 10-year Treasury yield approaching the 5% threshold marks a historically important inflection point. Beyond that level, interest rates typically become a more sustained headwind for equities," the report stated.