[New York Stock Market] WTI Surpasses $100; All Major Indexes Fall as 30-Year Yield Hits New High

PPI Rises 0.4% Month-on-Month, 5.4% Year-on-Year
30-Year Treasury Yield Hits Highest Level Since 2007
FedWatch Shows Over 70% Probability of Rate Hike

West Texas Intermediate (WTI) crude oil has surpassed $100 per barrel, and U.S. Treasury yields have soared, causing all three major U.S. stock indexes to decline on September 10 (local time) in New York. As concerns about inflation intensify due to the prolonged Iran war, the market has priced in a more than 70% chance that the Federal Reserve (Fed) will raise interest rates.

As of 10:25 a.m. at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average was down 226.48 points, or 0.43%, to 52,254.18 from the previous session. The S&P 500 Index, focused on large-cap stocks, had fallen 38.32 points, or 0.50%, to 7,597.04. The tech-heavy Nasdaq Index declined by 119.12 points, or 0.45%, to 26,134.22.

The market sentiment appeared to retreat due to the simultaneous sharp rise in international oil prices and Treasury yields. This was largely fueled by concerns that, as the war between the U.S. and Iran stretches into its seventh month, disruptions to Middle Eastern oil supply could be sustained.

On the New York Mercantile Exchange, WTI for October delivery was up 3.76% at $99.66 per barrel compared to the previous session. WTI had briefly surpassed $100 per barrel earlier in the session before surrendering some of its gains. On the ICE Futures Exchange, Brent crude for November delivery was up 3.48% at $104.73 per barrel.

The surge in oil prices sparked renewed inflation fears, which in turn sent U.S. Treasury yields climbing. The 10-year Treasury yield broke through 4.9%, reaching its highest level since November 2023. The 30-year Treasury yield also rose as high as 5.35% during intraday trading, marking its highest point since 2007.

This simultaneous increase in Treasury yields and oil prices especially weighed on semiconductor stocks, which had previously led the market's rally. Persistent high interest rates reduce the present value of future earnings, and rising energy costs could further pressure the economy and corporate earnings. Intel shares were down about 6%, while Micron Technology had fallen around 4%.

The U.S. producer price index (PPI) released today was in line with market expectations but failed to alleviate investor concerns about inflation. According to the U.S. Department of Labor, the PPI for August rose 0.4% from the previous month, the largest increase since May. Compared to a year earlier, it climbed 5.4%. The core PPI, which excludes food and energy, rose 0.2% month over month and 4.6% year over year.

Energy prices and transportation & warehousing costs rebounded sharply after two consecutive months of decline, pushing the producer price index higher. Airline fares and hospital service fees also saw significant increases, and legal services prices rose 1.7%, the largest increase since this statistic began in 2009. These categories are reflected in the Fed's preferred inflation indicator, the Personal Consumption Expenditures (PCE) price index.

With several detailed components of the PPI coming in stronger than expected, some in the market judged that the odds of a Fed rate hike next week had increased. Accordingly, market participants are closely watching the Consumer Price Index (CPI) to be released on September 11. Both the PPI and CPI feed into the calculation of the PCE price index, which is the Fed's preferred measure of inflation. However, this month’s PCE price index will only be published after the Fed announces its interest rate decision on September 16.

Steven Coltman, Head of Macroeconomics at 21Shares, commented, “The PPI did not offer a decisive answer on whether the Fed will raise rates next week,” adding, “However, with WTI crude back above $100 and Treasury yields hitting new highs, anxiety among investors ahead of the CPI release has increased.”

According to CME FedWatch, the interest rate futures market is pricing in a 74% probability that the Federal Open Market Committee (FOMC) will raise the benchmark rate by 0.25 percentage points on September 16.

Meanwhile, the U.S. Treasury Department announced it would purchase up to $600 million worth of Treasuries with remaining maturities of 10 to 20 years to stabilize the long-term bond market. Although this is three times the previous buyback limit of $200 million, some analysts believe it will not be enough to stem the sell-off in Treasuries given the confluence of rising oil prices and fears of a Fed rate hike. As a result, attention has also turned to the U.S. 30-year bond auction scheduled for today.

This content was produced with the assistance of AI translation services.