It has been a tumultuous start to Wednesday on Wall Street, as major U.S. equity indices and all eleven S&P 500 sectors found themselves trading in the red. The spike in volatility has been driven by growing investor concerns over interest rates and the subsequent impact on the market.

Yields on longer-dated Treasury bonds continued their upward trend, following Tuesday's increases. The yield on the 30-year Treasury saw a significant surge, reaching 4.72% - a rise of nearly 15 basis points this week. This surge in yields has caused a decline in fixed-income assets, with the iShares 20+ Year Treasury Bond ETF (TLT) falling 0.9% after a 1.4% drop on Wednesday.

The CBOE Volatility Index (VIX), commonly referred to as the market's fear gauge, soared by 8% by 10:30 a.m. in New York. Similarly, the Merrill Lynch Option Volatility Estimate (MOVE), which acts as the bond market's equivalent to the VIX, also increased by 7%. This reflects the heightened levels of uncertainty and nervousness among investors.

The U.S. Dollar Index (DXY), as tracked by the Invesco DB USD Index Bullish Fund ETF (UUP), rose by 0.3%, indicating a strengthening dollar amidst the market turbulence.

Traders are now pricing in only 33 basis points of Federal Reserve rate cuts by the end of the year, suggesting that only one rate cut is fully priced in. Looking ahead to the end of Q1 2025, traders are factoring in 52 basis points of cuts, implying the anticipation of two rate cuts within a year.

Despite this, economists predict a marginal decline in both the headline and core inflation indexes. The headline index is expected to drop from 2.7% to 2.6% year-on-year, while the core index is expected to decrease from 2.8% to 2.7%.

In terms of stock market performance, the S&P 500 Index, tracked by the SPDR S&P 500 ETF Trust (SPY), was down 0.6%. The Nasdaq 100 Index, monitored through the Invesco QQQ Trust (QQQ), inched down by 0.5%. Meanwhile, the Dow Jones, tracked by the SPDR Dow Jones Industrial Average (DIA), experienced a fall of 0.8%. This marks the fourth red day out of the last five for the blue-chip gauge.

Small caps, represented by the iShares Russell 2000 ETF (IWM), saw a decline of 1.3%, further adding to the overall negative sentiment in the market.

In company news, American Airlines Group Inc. (AAL) was hit hard, with its shares dropping over 14%, marking its worst performance in four years. This decline followed analyst downgrades by Jefferies and Seaport Global.

On the other hand, Marathon Oil Corp. (MRO) experienced a rise of nearly 10% in response to an all-stock acquisition deal worth $22.5 billion by ConocoPhillips (COP).

Moderna Inc. (MRNA) continued its decline, falling by 7% after an 8% drop on Tuesday, while Molina Healthcare Inc. (MOH) saw a significant drop of 7.5%, on track for its largest fall since September 2020.

As the market grapples with rising interest rate concerns and heightened volatility, investors will keep a close eye on economic indicators and earnings reports for further insights into the direction of the market in the coming weeks.