Oil Price Surge Sends US Stocks Tumbling as Fed Rate Hike Odds Skyrocket
US stocks fell sharply at midday on Thursday as oil prices surged by 6%, and long-term Treasury yields hit their highest levels since 2007. This sent a strong signal that the Federal Reserve may raise interest rates next week.
The West Texas Intermediate crude price jumped to $101.43 per barrel, while Brent climbed to $106.78. Long-dated Treasury yields rose sharply, with the 10-year yield reaching 4.93%, its highest since 2023, and the 30-year yield climbing to 5.35%, a level last seen in May 2007.
The trigger for the sell-off was August's producer price data, which showed a 0.4% month-over-month increase in headline PPI, but an annual rate of 5.4%. This topped the consensus forecast and pushed the CME FedWatch odds of a rate hike to around 70%, up from about 62% before the release.
The S&P 500 fell 0.4%, while the Dow Jones Industrial Average dropped 266 points, or 0.5%, to 52,114.23. The Nasdaq 100 slipped 0.7%. Apple Inc., however, rose 2.6% after its foldable iPhone Duo launch.