US Stocks Fall Amid Rising Bond Yields and Strong Economic Report
US stocks experienced a downturn on Wednesday after bond yields surged due to higher oil prices and a strong economic report.
The S&P 500 index fell by 0.8% while the Dow Jones Industrial Average dropped 352 points, or 0.7%, and the Nasdaq composite sank 1.1% from its all-time high.
The jump in bond yields was significant, rising to 5.10% from 4.96% late Tuesday, which is a considerable move for the bond market. High yields have an undercutting effect on stock prices and also slow down the economy by making borrowing money more expensive.
Worries about inflation received a boost after a preliminary report indicated that US business activity grew at its strongest level in over five years. This suggests that the economy may have plenty of fuel for further inflation, which could lead to higher costs for businesses and eventually be passed on to customers.
The price for Brent oil to be delivered in November rose 3.9% to $103.08, reversing a decline since it neared $110 last week. The high oil prices are due to concerns that the war with Iran will keep oil bottled up in the Middle East for an extended period.
Even though the price of Brent has declined recently, it remains much higher than its pre-war level of around $72 per barrel.