Yields Hit 2007 Highs, S&P 500 Falls 0.75% on Rate Fears
Treasury yields surged to multi-year highs, driving broad equity losses and raising Fed hike odds to 69%.
Key points
- The 10-year Treasury yield hit 5.11%, its highest close since July 2007, triggering broad stock losses.
- The S&P 500 fell 0.75% and the Russell 2000 dropped 1.8% as only Energy gained.
- Markets now price nearly four Fed rate hikes in the coming year, with October odds at 69%.
US stocks fell broadly on Wednesday as Treasury yields jumped to fresh multi-year highs. The 10-year yield rose to 5.11%, its highest close since July 2007. This spike pressured equities across the board.
The S&P 500 dropped 0.75%, while the rate-sensitive Russell 2000 fell 1.8%. The Nasdaq declined 1.1% on tech weakness. Only the Energy sector posted gains, rising 1% on higher oil prices.
Yields Reach Decade Highs
The 10-year Treasury yield climbed about 14 basis points to 5.11%. This is the biggest one-day move since April 2025. The 2-year yield also rose 14 basis points to 4.89%.
The 5-year yield breached 5% for the first time since 2007. This followed a weak $70 billion auction. Strong PMI data and a hawkish Fed speech fueled the rise.
Market Breadth Collapses
Sector breadth collapsed to just one of 11 sectors higher. Energy was the sole gainer, boosted by oil price moves. Semiconductors ended a six-day winning streak during the selloff.
Hike Odds Rise Sharply
Markets now price nearly four Fed rate hikes over the next year. October hike odds jumped to 69% from 55% a day earlier. A month ago, these odds stood at just 9%.
This shift reflects a genuine re-tightening cycle, according to reports from thestreet.com. Higher discount rates now weigh on equity valuations. Borrowing costs for mortgages and corporations are also rising.
