[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, leading all three major U.S. stock indexes to decline on September 10 (local time) in New York. As concerns grow over inflation due to the prolonged war involving Iran, the market has priced in a more than 70% probability that the Federal Reserve (Fed) will raise its benchmark interest rate.

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

The market on this day showed weakened investor sentiment due to the simultaneous surge in international oil prices and Treasury yields. This is because, as the war between the United States and Iran enters its seventh month, concerns are mounting that oil supply disruptions in the Middle East could be prolonged.

On the New York Mercantile Exchange, October WTI crude rose by 3.76% from the previous session to $99.66 per barrel. WTI had broke through $100 per barrel earlier in the session before giving back some gains. On the ICE Futures Exchange, November Brent crude jumped 3.48% to $104.73 per barrel over the previous session.

The rise in oil prices has fueled fresh worries about reigniting inflation, pushing up U.S. Treasury yields as well. The 10-year Treasury yield broke above 4.9%, reaching its highest level since November 2023. The 30-year Treasury yield also climbed to as high as 5.35% during the session, marking its highest point since 2007.

The simultaneous rise of Treasury yields and oil prices particularly weighed on semiconductor stocks, which have led the stock market rally. Persistent high interest rates diminish the present value of future profits, while rising energy costs can pressure economic activity and corporate earnings. Intel shares are down around 6%, and Micron Technology has fallen by about 4%.

While the U.S. producer price figures released today met market expectations, they failed to ease investors' inflation concerns. According to the U.S. Department of Labor, the Producer Price Index (PPI) for August rose 0.4% from the previous month, the largest increase since May. On a year-over-year basis, PPI rose 5.4%. The core PPI, which excludes food and energy, increased by 0.2% from the previous month and by 4.6% year over year.

Producer prices were pushed up by a sharp rebound in energy prices and transportation and warehousing costs, which had declined for two consecutive months. Airfares and hospital medical fees also jumped significantly, and the price of legal services rose by 1.7%—the largest increase since the data series began in 2009. These items are reflected in the Personal Consumption Expenditures (PCE) Price Index, which is the inflation gauge preferred by the Fed.

With some PPI subcategories coming in stronger than expected, the outlook in the market is that the odds of a Fed interest rate hike next week have increased. Accordingly, investors are now closely watching the Consumer Price Index (CPI) to be released on September 11. Both the PPI and CPI feed into the calculation of the Fed’s preferred inflation measure, the PCE Price Index. However, the PCE Price Index for this month will only be released after the Fed’s interest rate decision on September 16.

Steven Coltman, Head of Macroeconomics at 21Shares, stated, "The PPI did not provide a decisive answer regarding whether the Fed will raise rates next week. However, with WTI breaking $100 again and Treasury yields setting new highs, investor anxiety has heightened ahead of the CPI announcement."

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

Meanwhile, the U.S. Department of the Treasury announced that it will purchase up to $600 million worth of Treasuries with a remaining maturity of 10–20 years in order to stabilize the long-term Treasury market. This is triple the previous buyback limit of $200 million, but some analysts say that combined with rising oil prices and concerns about Fed rate hikes, the move is insufficient to stem Treasury selling pressure. As a result, attention is also focused on the scheduled auction of 30-year U.S. Treasuries today.

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