U.S. stock indexes fell on Wednesday, extending a slide that pushed the S&P 500 and Dow Jones Industrial Average to 6-week lows. The S&P 500 was down 0.58%, the Dow fell 0.95%, and the Nasdaq 100 slipped 0.69%, as higher energy prices lifted inflation expectations and drove bond yields higher globally. E-mini S&P futures were down 0.56% and September E-mini Nasdaq futures were lower by 0.67%.
Pressure also came from weaker economic signals and a cooling of enthusiasm around the artificial intelligence trade. The 10-year U.S. Treasury yield rose to a 19-year high of 5.04%, while the 10-year German Bund climbed to a 17-year high of 3.57% and the 10-year Japan government bond rose to a 30-year high of 3.04%. In company-specific moves, crypto-exposed equities declined as expectations dimmed that a comprehensive U.S. crypto regulatory bill will advance through Congress.
Key takeaways
- Stocks declined broadly: The S&P 500 fell 0.58%, the Dow dropped 0.95%, and the Nasdaq 100 slid 0.69%.
- Catalyst: Crude oil climbed more than 2%, lifting inflation expectations and pushing yields higher, alongside weaker U.S. and China economic data.
- Rates were a key driver: The 10-year U.S. Treasury yield reached a 19-year high near 5.04%, weighing on equity valuations.
- Sector effects were mixed: Chip and AI infrastructure names recovered some earlier losses, while airlines and crypto-related stocks sold off.
- Implication for investors: With Fed and European rate expectations priced higher, markets are likely to remain sensitive to inflation and growth surprises.
What drove the selloff
Energy prices were a central factor behind the risk-off tone. Crude oil futures rose more than 2% on the day, contributing to higher inflation expectations and weakening Treasuries. The move in oil followed reports of ongoing disruptions to Middle East supply routes, including the closure of a major Saudi pipeline after attacks, which removes capacity that had been moving roughly 7 million barrels per day away from the Persian Gulf toward the Red Sea.
Macro data added to the pressure. In the U.S., the September Empire manufacturing survey of general business conditions fell 13.0 points to 7.6, coming in below expectations of 15.0. In China, data released on the day pointed to softer consumer and housing conditions: August retail sales rose 0.4% year over year versus expectations of 0.8%, the surveyed jobless rate unexpectedly increased 0.1 percentage point to 5.3%, and new home prices fell 0.17% month over month for the 39th consecutive month.
On the rates side, multiple global benchmarks pushed higher. The 10-year U.S. yield climbed to a 19-year high, while European and Japanese yields also touched long-term peaks, underscoring the broad sensitivity of global investors to inflation risk and central bank expectations.
Market reaction across sectors
Although major indexes moved lower, losses were not uniform. Chipmakers and AI-related infrastructure shares posted gains that helped limit the damage from the broader tape. The iShares Semiconductor ETF rose nearly 1%, and several large and mid-cap semiconductor names moved higher, including Qualcomm, ARM, Advanced Micro Devices, Marvell Technology, Intel, and NXP Semiconductors.
Energy-related equities also advanced as oil strengthened. Several producers were higher, including APA, Devon Energy, ConocoPhillips, Marathon Petroleum, Phillips 66, Occidental Petroleum, Diamondback Energy, Valero Energy, and ExxonMobil. In the Dow, Chevron led gainers with a rise of more than 1%.
Other groups underperformed as crude prices increased expected input costs. Airlines and cruise operators fell, reflecting the typical sensitivity of travel demand and margins to fuel expenses. American Airlines, United Airlines, Alaska Air, Delta, Southwest, Carnival, Royal Caribbean, and Norwegian Cruise Line all declined.
Technology and crypto-linked names also faced headwinds. Software stocks retreated after Monday’s gains, while cryptocurrencies-exposed equities fell as sentiment weakened around the likelihood and timing of U.S. legislative progress on crypto regulation. Bitcoin was down more than 4%, and several listed crypto-related companies declined accordingly, including Circle Internet Group and Coinbase Global, among others.
Rates and central bank pricing in the spotlight
The move in government bond yields was closely tied to expectations for upcoming central bank decisions. Markets were pricing a 94% chance of a 25 basis point Fed rate increase at the next FOMC meeting on Tuesday/Wednesday, according to the day’s market-implied probabilities cited in the report. Expectations for European policy also tightened, with markets discounting a 51% chance of a 25 basis point ECB rate hike at its next meeting on October 29.
In Treasuries, December 10-year T-notes fell by 10 ticks on the day, while the 10-year yield rose to about 5.004%. The report also pointed to supply and inflation dynamics: the Treasury auction of $13 billion in 20-year T-bonds scheduled later today, along with the steep rise in oil that supported higher inflation expectations.
Overseas, equities were also lower. The Euro Stoxx 50 dropped to a 2.25-month low, China’s Shanghai Composite ended down, and Japan’s Nikkei-225 closed near flat.
Company updates investors are watching
- Forgent Power Solutions: Shares rose more than 10% after reporting fourth-quarter revenue of 461.7 million, above the consensus of $432 million.
- Dave & Buster’s: The stock fell around 14% after reporting second-quarter revenue of $544.1 million, below consensus of $558.1 million.
- Axon Enterprise: Shares dropped more than 11% after announcing plans to offer $1 billion of convertible senior notes due in 2031 in a public offering.
- Waystar Holding: The stock rose more than 7% after a Reuters report said the company is exploring options that could include a sale.
- Enova International: Shares fell more than 24% after withdrawing its application with the Office of the Comptroller of the Currency and the Federal Reserve for the acquisition of Grasshopper Bancorp.
Attention now turns to whether markets can stabilize if bond yields stop rising. Investors will likely watch the next set of central bank signals at the upcoming Fed meeting, as well as corporate earnings coming later in the week, including reports scheduled for September 15 for Critical Metals Corp, Evolution Petroleum Corp, and Forgent Power Solutions.
