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, nearing 5%.
The Dow Jones Industrial Average fell 0.7%, the S&P 500 dropped 0.8%, and the Nasdaq Composite was down 1.1%. Every sector on the S&P 500 fell except energy. Communications services and utilities were down 2%, while Expedia, Airbnb, and Booking Holdings fell 8% and 5% respectively. Palo Alto Networks and CrowdStrike Holdings rose 5%.
The dollar leaped 0.5% to its highest in nearly two months, with dollar/yen above 158.00. US diesel futures slid 2% to a two-week low after comments from President Trump about a potential ban on US diesel exports. Gold fell 1.5%.