Wall Street Falls as Treasury Yields Surge, Oil Rebounds on Iran Tensions

Wall Street ended sharply lower Wednesday as surging U.S. Treasury yields pressured technology stocks, while investors monitored renewed U.S.-Iran tensions and Chinese President Xi Jinping’s visit to Washington.

The S&P 500 fell 0.7% to 7,709.62, while the Dow Jones Industrial Average dropped 0.7% to 51,512.42. The Nasdaq Composite declined 1.1% to 26,936.04, ending a two-session run of record closes.

Treasury yields jumped after strong U.S. economic data and hawkish Federal Reserve commentary strengthened expectations for another interest rate hike. S&P Global said U.S. business activity accelerated for a fourth consecutive month in September, reaching its fastest pace since July 2021.

Inflation pressures also intensified, with input costs rising at their fastest rate in four years amid higher fuel and transportation expenses. Markets subsequently raised the probability of a 25-basis-point Fed rate hike in October to around 68%, up from roughly 55% a day earlier.

The benchmark 10-year Treasury yield climbed 15.4 basis points to 5.102%, its highest level since July 2007. Fed Governor Michael Barr also said further monetary policy adjustments would likely be necessary to return inflation to the central bank’s 2% target.

Higher yields weighed heavily on rate-sensitive technology and travel stocks. The S&P 500 technology sector declined 0.7%, with Expedia, Airbnb and Booking Holdings among notable losers.

Meanwhile, Brent crude surged more than 4% above $103 per barrel, snapping a five-session losing streak as optimism over U.S.-Iran diplomacy weakened. Iranian President Masoud Pezeshkian said Tehran remained open to negotiations but would not accept pressure, while U.S. Secretary of State Marco Rubio described recent discussions as significant but not a “major breakthrough.”

Investors are also focused on Xi’s Washington visit and expected talks with President Donald Trump. Artificial intelligence, trade, rare earth exports and Chinese agricultural purchases are expected to feature prominently, with markets watching for signals on the U.S.-China tariff ceasefire due to expire in November.