US stock futures slumped Wednesday as investors braced for further interest-rate hikes.
The 10-year Treasury yield broke past 4% for the first time in 12 years for the same reason.
Investors are worried stubborn inflation will mean rates stay higher for longer.
US stock futures dropped Wednesday and 10-year Treasury yields broke past 4% for the first time in at least 12 years, as investors bet the Federal Reserve would be fighting inflation for a long time to come.
Both the S&P 500 and Dow stock indices closed lower for a sixth straight session on Tuesday, marking their worst streak since February 2020. Notably, the S&P 500 closed at a fresh low for the year at 3,655 points, while the Dow ended the day in bear market territory, down over 20% from its January high.
Stocks have been under pressure since the Fed hiked interest rates by 75 basis points for the third meeting in a row last week. The US central bank has raised rates from near zero at the start of this year to a range of 3% and 3.25%.
The Fed is aggressively raising rates to curb inflation, which soared to a 40-year high in June and remained above 8% in August. However, investors worry that tightening monetary policy will choke growth and drag the US economy into a recession.
The flurry of hikes has raised investors' expectations of where interest rates will peak. Higher rates generally weigh on stock prices, as they encourage saving over spending, make borrowing more expensive, and reduce the relative return from equities compared to other assets.
The prospect of higher, sustained rates, coupled with concerns that the Japanese government will move to shore up the tumbling yen by selling US government debt, pushed the 10-year US treasury yield up 7 basis points to over 4% on Wednesday — its highest yield since 2008.
The rise in yields helped lift the dollar to a two-decade high Wednesday, as the British pound slipped again. The dollar index — which tracks the US currency against sterling and five other major counterparts — was up 0.50% at 114.68 at last check, after touching 114.76.
Slumping stocks and soaring bond yields are driving worries that US inflation won't cool anytime soon, driving expectations that the Fed will have to keep rates higher for longer in response.
Their fears are being exacerbated by Russia's invasion of Ukraine, which has driven up food and fuel prices and sparked an energy crisis in Europe. A slowdown in China's economy, spurred by the impact of ongoing COVID-19 lockdowns on industry, is another concern.
How other key assets are performing Wednesday:
Read the original article on Business Insider