Market Selloff Deepens as Treasury Yields Surge on Hawkish Fed Signals

Equity markets are experiencing a broad decline, with the S&P 500 Index ($SPX) (SPY) falling -0.48%, the Dow Jones Industrial Average ($DOWI) (DIA) dropping -0.33%, and the Nasdaq 100 Index ($IUXX) (QQQ) sliding -0.73%. December E-mini S&P futures (ESZ26) are down -0.48%, and December E-mini Nasdaq futures (NQZ26) are down -0.73%.

Stock indices are facing significant pressure as crude oil prices reversed overnight declines to rise more than +1%, driving bond yields higher and dampening investor sentiment. The 10-year Treasury note yield surged to a 19-year high of 5.06%, which elevated the probability of a Federal Reserve rate hike at the upcoming FOMC meeting to 75%, up from 53% the previous day. Additionally, semiconductor and AI-infrastructure stocks are retreating, weighing on the broader market and erasing a portion of Tuesday’s gains that had propelled the Nasdaq 100 to a record high.

Equity markets are also weighed down by rising bond yields following hawkish remarks from Federal Reserve Governor Michael Barr, who stated that “further policy adjustments by the Fed are likely to be needed to ensure inflation comes down to target in a timely fashion.”

Today’s domestic economic data exceeded expectations, which supported equities but simultaneously pushed bond yields higher. The September S&P manufacturing PMI unexpectedly rose by +3.1 points to 57.0, surpassing expectations of a decline to 53.7 and marking the fastest pace of expansion in 4.25 years.

Stocks found a measure of support from positive anticipation ahead of a summit later this week between Presidents Trump and Xi Jinping.

Further support came from the Organization for Economic Co-operation and Development (OECD), which raised its US GDP forecast while cutting its inflation outlook for the current year. The OECD increased its 2026 US GDP forecast by +0.2 to 2.2%, up from a June forecast of 2.0%, and reduced its 2026 US inflation forecast by -0.1 to 3.6%, down from a June forecast of 3.7%.

US MBA mortgage applications declined -1.5% for the week ended September 18, with the purchase mortgage sub-index falling -0.8% and the refinancing sub-index dropping -2.6%. The average 30-year fixed-rate mortgage rose +15 basis points to a 2.25-year high of 7.12%, up from 6.97% in the prior week.

November WTI crude oil prices (CLX26) recovered from overnight losses, gaining more than +1% as the United States and Iran remain at odds over key issues, including control of the Strait of Hormuz. Crude prices initially fell in overnight trading on signs of increasing crude supplies departing the Middle East. However, data compiled by Bloomberg from the European Union’s Copernicus satellite revealed that oil supertankers with the capacity to ship 12 million barrels of crude were present at Saudi Arabia’s Persian Gulf export installations on Tuesday. Meanwhile, Saudi Arabia announced plans for a meaningful resumption of its East-West pipeline to the Red Sea by Saturday.

Financial markets are currently pricing in a 75% probability of a +25 basis point Fed rate hike at the next FOMC meeting on October 27-28.

Overseas stock markets traded lower today. The Euro Stoxx 50 fell from a two-week high, closing down -0.27%. China’s Shanghai Composite closed down -0.39%. Japan’s Nikkei-225 Stock Average did not trade today, as Japanese markets were closed for the Autumnal Equinox Day holiday.

Interest Rates

December 10-year T-notes (ZNZ6) are down by -20 ticks today. The 10-year Treasury yield is up +10.3 basis points to 5.066%. December T-notes retreated, dropping to a 2.75-year low, while the 10-year yield surged to a 19-year high of 5.067%. T-notes are under pressure after WTI crude oil erased its overnight decline and turned higher, raising inflation expectations. Supply pressures are also weighing on the market, as the Treasury is scheduled to auction $28 billion of 2-year floating-rate notes and $70 billion of 5-year T-notes later today. Losses in T-notes accelerated after the September S&P manufacturing PMI unexpectedly rose to a 4.25-year high, boosting the odds of a Fed rate hike at next month’s FOMC meeting to 75% from 53% yesterday.

European government bond yields moved higher today. The 10-year German bund yield is up +7.6 basis points to 3.538%, and the 10-year UK gilt yield is up +8.0 basis points to 5.318%.

The Eurozone September S&P manufacturing PMI was unchanged at 52.7, stronger than expectations of a decline to 52.6.

The Eurozone September S&P composite PMI unexpectedly rose +1.1 to 53.1, surpassing expectations of a decline to 51.7 and marking the fastest pace of expansion in 3.25 years.

ECB Governing Council member and Bundesbank President Joachim Nagel stated that Eurozone inflation is above 3% and is projected to remain above the ECB’s 2% goal for another year. Consequently, the ECB may need to raise interest rates to a level that restrains economic growth.

The OECD raised its 2026 Eurozone GDP forecast by +0.2 to 1.0%, up from a June forecast of 0.8%. The organization also raised its 2026 Eurozone inflation forecast by +0.2 to 3.0%, up from a June forecast of 2.8%.

Markets are discounting a 58% probability of a +25 basis point ECB rate hike at the ECB’s next meeting on October 29.

US Stock Movers

Chipmakers and AI-related stocks are under pressure today, weighing on the overall market. The iShares Semiconductor ETF (SOXX) is down more than -1%. Intel (INTC), Broadcom (AVGO), Lam Research (LRCX), and SanDisk (SNDK) are down more than -2%. Additionally, ARM Holdings Plc (ARM), Advanced Micro Devices (AMD), Nvidia (NVDA), Micron Technology (MU), NXP Semiconductors NV (NXPI), KLA Corp (KLAC), ASML Holding NV (ASML), Analog Devices (ADI), Microchip Technology (MCHP), and Qualcomm (QCOM) are down more than -1%.

Airlines and cruise line operators are falling today as WTI crude oil rises more than +1%, increasing fuel costs and dampening profitability prospects. Royal Caribbean Cruises (RCL) is down more than -3%, and Alaska Air Group (ALK) is down more than -2%. Also, American Airlines Group (AAL), United Airlines Holdings (UAL), Delta Air Lines (DAL), Southwest Airlines (LUV), Carnival (CCL), and Norwegian Cruise Line Holdings (NCLH) are down more than -1%.

Software stocks are climbing today, providing a supportive factor for the broader market. Palantir Technologies (PLTR) is up more than +4% to lead gainers in the S&P 500 and Nasdaq 100. Also, Atlassian Corp (TEAM) and Datadog (DDOG) are up more than +3%, while Cadence Design Systems (CDNS), IBM (IBM), ServiceNow (NOW), Salesforce (CRM), Thomson Reuters (TRI), and Workday (WDAY) are up more than +2%. Finally, Adobe Systems (ADBE) is up more than +1%.

Energy stocks and service providers are moving higher alongside the strength in crude oil prices. APA Corp (APA) is up more than +3%, and ConocoPhillips (COP), Devon Energy (DVN), and Occidental Petroleum (OXY) are up more than +2%. Also, Chevron (CVX), ExxonMobil Holdings (XOM), and Halliburton (HAL) are up more than +1%.

Voyager Technologies (VOYG) is down more than -13% after announcing its intention to offer $350 million of convertible senior notes in a private offering.

Paychex (PAYX) is down more than -7% to lead losers in the Nasdaq 100 after reporting Q1 management solutions revenue of $1.21 billion, weaker than the consensus of $1.23 billion.

McDonald’s (MCD) is down more than 4% to lead losers in the Dow Jones Industrials after announcing it will spend up to $8.5 billion to help franchises serve better food and improve service.

IonQ (IONQ) is up more than +7% after announcing it developed the industry’s first end-to-end real-time quantum error correction decoder that runs on a single standard central processing unit.

Earnings Reports (9/23/2026)

Cintas Corp (CTAS), Cracker Barrel Old Country Store (CBRL), General Mills Inc (GIS), HB Fuller Co (FUL), NioCorp Developments Ltd (NB), Paychex Inc (PAYX), Stitch Fix Inc (SFIX), and ZenaTech Inc (ZENA).

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