U.S. stocks are under pressure as yields on U.S. Treasury bonds reach multi-decade highs.
In pre-market trading, the technology-heavy Nasdaq (NDAQ) index is down 1%, while the Dow Jones Industrial Average is down 215 points, or 0.4%, and the S&P 500 is lower by 0.6%.
Equity markets are declining as Treasury yields continue moving upwards with Wall Street pricing in further interest rate hikes from the U.S. Federal Reserve.
The yield on the 30-year Treasury bond is currently at 5.44%, its highest level since 2004. The yield on the benchmark 10-year Treasury has risen to 5.15%, a level last reached in 2007.
The yields on U.S. government bonds are climbing as volatile oil prices march higher and after economic data suggested that inflation remains elevated in America.
Consequently, traders on Wall Street are now placing the odds that the U.S. Federal Reserve raises interest rates another 25-basis points at its Oct. 28 meeting at 75%.
A week ago, those odds were 50/50.
Higher yields on government bonds tend to squeeze consumers’ finances as they face bigger borrowing costs at a time when they’re already paying more for gasoline and other items.
Rising bond yields also make U.S. Treasurys more attractive to investors and lead them to shift capital out of riskier assets such as stocks and cryptocurrencies.
In early trading on Sept. 24, oil prices were up another 1%, with Brent crude, the international standard, back near $105 U.S. per barrel.
Stocks are also under pressure elsewhere in the world. In Europe, shares fell with the pan-European Stoxx 600 index down 0.4% on the day.
