Bond Market Woes Send Stocks Plummeting Amid Inflation Fears

Pressure from the US bond market reached new heights on Wall Street on Wednesday after a surprisingly strong economic report sparked concerns about inflation. The S&P 500 fell 0.8% following the release, with the Dow Jones Industrial Average plummeting 352 points and the Nasdaq composite dropping 1.1%. The sharp decline was largely driven by the surge in the yield of the 10-year Treasury to 5.10%, its highest level since 2007.

The jump in yields is a significant concern for investors, as it can undercut stock prices and slow down economic growth by making borrowing more expensive. This has been a growing worry, particularly with inflation remaining stubbornly high. The Federal Reserve raised interest rates last week in an effort to combat rising costs of living, and Fed Gov. Michael Barr warned that further hikes are likely needed to meet the 2% target.

The strong economic report itself was also seen as a negative by some investors, as it suggested growth may be more robust than previously thought. The preliminary data showed US business activity surging to its strongest level in over five years, with costs for businesses increasing at their fastest rate in four years. Oil prices are high due to concerns about the Iran war, and this is expected to contribute to higher costs for consumers.