Bond Market Pressure Hits New Level, Sending Stocks into Free Fall

The US bond market exerted significant pressure on Wall Street, causing stocks to decline as worries about inflation intensified. The S&P 500 fell 0.8%, with the Dow Jones Industrial Average dropping 352 points or 0.7% and the Nasdaq composite sinking 1.1%. These losses came despite oil prices stabilizing after their recent decline.

The 10-year Treasury yield jumped to 5.10% from 4.96% late Tuesday, which is a considerable move for the bond market. High yields undercut stock prices and slow economic growth by making borrowing more expensive. The jump sent the 10-year yield near 5.14%, matching its level in 2007 before the global financial crisis.

A preliminary report showed US business activity growing at its strongest level in over five years, indicating a potential surge in inflation. Businesses are passing on higher costs to customers due to expensive oil and other factors. The Federal Reserve raised interest rates last week to combat rising prices, with further hikes likely needed to reach the 2% target.

Despite strong profit growth for US companies supporting the stock market, caution is growing among potential customers due to higher mortgage rates caused by the rise in the 10-year Treasury yield. Companies like KB Home and General Mills are reporting stronger profits but also facing challenges due to geopolitical uncertainty and economic headwinds.