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US stocks slide as 10-year Treasury yields hit highest since 2007
The flash US Composite PMI Output Index rose to 58.4, and traders lifted the odds of an October rate hike to 66%, helping push the 10-year yield up 13.9 basis points to 5.106%.
US shares fell as benchmark 10-year Treasury yields climbed to their highest level since 2007, after data pointed to rapid US business activity growth in September driven by a surge in new orders, according to Reuters.
S&P Global reported its flash US Composite PMI Output Index rose to 58.4, the highest since July 2021, fueling concerns that robust growth is adding inflationary pressure. With inflation still above the Federal Reserve's 2% target, traders priced in further rate hikes, sending 2-year yields up 11.4 basis points to 4.891% and the 10-year yield up 13.89 basis points to 5.106%, the biggest one-day increase since April 2025.
Fed funds futures markets now price a 66% chance of an October rate hike, up from 53% earlier in the day. Reuters also cited Fed Governor Michael Barr, who said the central bank took an important step last week to recalibrate short-term borrowing costs to bring down inflation, while signaling more rate hikes may be needed.
The bond selloff coincided with weaker stocks, with the Dow Jones Industrial Average down 0.68%, the S&P 500 down 0.75%, and the Nasdaq Composite down 1.13%. Reuters noted the US Treasury Department drew very weak demand for a $70 billion 5-year note auction, with the notes selling at the highest yield at an auction since 2007.
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