U.S. Treasury yields surged on expectations of further interest rate increases by the Federal Reserve, weighing on New York stocks. The yield on the 10-year Treasury note again topped 5% after crossing that threshold on the 15th, reaching its highest level since July 2007.
The Nasdaq Composite closed at 26,936.04 on the 23rd, down 308.24 points, or 1.13%, from the previous session. The Standard & Poor's 500 fell 58.61 points, or 0.75%, to 7,706.03, while the Dow Jones Industrial Average dropped 352.10 points, or 0.68%, to 51,511.59.
Rising Treasury yields and higher oil prices pushed stocks lower as the prospect of additional Fed rate increases came into focus. A preliminary reading of S&P Global's September U.S. purchasing managers' index, released in the morning, came in stronger than expected and pointed to continued economic expansion. Hawkish comments from a senior Fed official added to the pressure. Federal Reserve Governor Michael Barr said at an event in Chicago that "further policy adjustment will likely be needed to bring inflation down to target in a timely manner."
Market expectations for another rate increase strengthened quickly. According to CME Group's FedWatch tool, market participants were pricing in roughly a 70% chance of a rate increase next month.
In global bond markets, the benchmark 10-year U.S. Treasury yield jumped 0.17 percentage points to 5.135%. The two-year yield, which is sensitive to monetary policy, reached 4.947% in intraday trading, and the 30-year yield, a reference for U.S. mortgage rates, rose to 5.415%, surpassing its previous peak. The yield on five-year notes sold by the U.S. Treasury in a $70 billion auction reached 5.033%, the highest in 20 years, since June 2006.
Oil prices also climbed nearly 4% amid uncertainty over the prospects for a diplomatic resolution between the United States and Iran. On the ICE Futures Europe exchange in London, Brent crude for November delivery settled at $103.08 a barrel, up $3.83, or 3.86%, from the previous session. On the New York Mercantile Exchange, West Texas Intermediate for November delivery closed at $92.16 a barrel, up $1.64, or 1.81%.
President Donald Trump pressed Iran in a speech to the U.N. General Assembly the previous day, saying it must choose between a deal and annihilation. Iranian President Masoud Pezeshkian responded that Iran would never surrender to the United States.
"The equity market wants a resolution to the conflict," said Lauren Cassidy, chief investment officer of the Founders100 ETF. "Otherwise, higher rates will stay higher for longer, and that will continue to weigh on stocks."
