Dow Slides as Yields Beat Fed to Rate Hike
The Dow Jones Industrial Average dropped by around 450 points to trade just under 52,000 ahead of the Federal Reserve's expected interest rate hike. This comes as the yield on the 10-year Treasury touched a high of 5.04%, its highest since 2007. The Fed is set to increase its overnight rate from 3.50-3.75% to 3.75-4.00%, which will impact banks like JPMorgan and Goldman Sachs that pay and charge the overnight rate.
The 10-year yield has risen five sessions in a row, with the Treasury buying back its own debt as part of operations aimed at lowering the rate. However, this move seems to have had the opposite effect, with the yield increasing instead. Treasury Secretary Scott Bessent stated that the Treasury market is 'in very good shape', but some analysts may disagree.
The Fed's decision comes amidst a weakening economy, with the New York Fed factory survey falling to 7.6 in August. Consumer prices rose by 3.4% in the year to August, driven largely by fuel costs. The hike is expected to be announced at 18:00 GMT on Wednesday, with futures predicting another rate increase by December and a third by March.
The Dow Jones Industrial Average's performance will likely be closely watched ahead of the announcement, particularly after failing to break above its 50-day Exponential Moving Average (EMA) near 52,700 in recent sessions. If the index can close above this level, it may indicate a shift in sentiment and potentially lead to further gains.