Key facts
- US stocks fell on Wednesday as the 10-year Treasury yield reached its highest level since 2007.
- Stronger-than-expected US business activity data for September contributed to the market move.
- The S&P Global flash US Composite PMI Output Index rose to 58.4 in September.
- Fed Governor Michael Barr indicated that further interest rate hikes are likely needed to combat inflation.
- Fed funds futures traders are pricing in a 73% probability of an October rate hike.
US stocks declined on Wednesday as benchmark 10-year Treasury yields surged to their highest level since 2007, driven by robust September business activity data. The S&P Global flash US Composite PMI Output Index rose to 58.4, indicating strong growth in both manufacturing and services sectors, with new orders seeing a significant increase.
Fed Governor Michael Barr reiterated the central bank's commitment to bringing down inflation, suggesting that further interest rate hikes are probable. This hawkish stance is reflected in market expectations, with Fed funds futures traders now pricing in a 73% probability of a rate hike in October, up from 53% previously. The 2-year Treasury yield also climbed to 4.862%, its highest since June 2024.
The Dow Jones Industrial Average fell 0.18%, the S&P 500 dropped 0.53%, and the Nasdaq Composite was down 1.05%. Globally, the pan-European STOXX 600 index slid 0.27%, and an MSCI index of global stocks fell 0.51%.
In other markets, oil prices rose, with US crude up 1.49% to $91.87 a barrel and Brent up 2.39% to $101.62 per barrel, amid anticipation of potential talks to end the Iran conflict and ahead of a summit between US President Donald Trump and Chinese President Xi Jinping. Gold prices fell 1.55% to $4,287.05 an ounce.
The dollar strengthened against major currencies, hitting multi-week highs versus the euro, sterling, and Canadian dollar, partly due to the prospect of higher US interest rates. The euro dropped 0.5% to $1.1389.