A sell-off in stocks picked up steam as Treasury yields surged, oil rose, and investors monitored US diplomatic efforts with Iran and China.
The Dow Jones Industrial Average (^DJI) dropped 0.6%, while the S&P 500 (^GSPC) declined by 0.6%. The Nasdaq Composite (^IXIC) fell 1% after the tech-heavy index had posted back-to-back record highs this week.
The 10-year Treasury yield (^TNX) spiked above 5% again to its highest level since 2007 as S&P’s gauge of US business activity expanded at a faster pace than economists expected.
Oil prices, meanwhile, turned higher as a potential thaw in US-Iran relations remained uncertain. President Trump said US and Iranian officials met for several hours at the UN on Tuesday, rekindling hopes of a truce between the two nations. Brent crude oil futures (BZ=F), the global benchmark, traded at $98 per barrel, while WTI crude futures hit $92.
That fueled increased bets that the Federal Reserve would hike interest rates at least once more this year, particularly after Federal Reserve governor Michael Barr called for “further policy adjustments” to bring inflation down.
President Trump is expected to greet Chinese President Xi Jinping at Joint Base Andrews, kicking off Xi’s first visit to Washington, D.C., in 11 years. Experts don’t expect any major policy breakthroughs, but the world leaders are expected to discuss trade, the war in Iran, rare earths, and artificial intelligence.
Any developments in AI policy are sure to generate interest among tech investors, particularly after Anthropic (ANTH.PVT) CEO Dario Amodei penned an essay urging companies to pace AI development cooperatively. A who’s who of Silicon Valley executives, including Nvidia’s (NVDA) Jensen Huang, OpenAI’s (OPAI.PVT) Sam Altman, and Google’s (GOOG) Sundar Pichai, will attend a dinner with Presidents Trump and Xi on Thursday.
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10-year Treasury yield hits highest level since 2007
The 10-year Treasury yield (^TNX) climbed as high as 5.07%, its highest level since 2007, on Wednesday. The 30-year Treasury (^TYX) yield touched 5.37% as the stock market declined.
The move higher in yields comes as oil prices rose and business activity data came in hotter than expected, fueling concerns about further Fed rate hikes.
Federal Reserve governor Michael Barr also signaled on Wednesday that additional interest rate hikes are needed to bring down sticky inflation.
Debt watch: Global debt climbs to record $365 trillion in first half of 2026
Global debt climbed to a record $365 trillion in the first half of 2026, according to a Wednesday report, as governments and companies continued heavy borrowing and higher rates raised the cost of carrying the enormous load.
Advanced economies spent more than $3.5 trillion on interest payments on internationally traded bonds over the 12 months through the first half of 2026, the Institute of International Finance (IIF) said Wednesday.
The figure compares with IIF estimates of $2.6 trillion in global spending on artificial intelligence, $3.1 trillion on defense, and $3.4 trillion on energy over the same period.
Those same forces, as well as healthcare spending, aren’t expected to retreat much even as financing becomes more expensive.
“There will be more debt accumulation, and most of this debt accumulation will be rate insensitive since they are structural and during this period, the market will be looking for the tipping points,” IIF global markets and policy director Emre Tiftik said during a Wednesday briefing.
The global debt check comes as US Treasury yields across the curve rose on Wednesday, with the benchmark 10-year reaching 5.06%, its highest level since July 2007.
Fed’s Barr says more rate hikes are needed
Yahoo Finance’s Jennifer Schonberger reports:
Federal Reserve governor Michael Barr said Wednesday that additional interest rate hikes are needed to bring down sticky inflation.
“Further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion,” Barr said in a speech in Chicago. “Inflation is above our 2% target and not clearly trending toward target in a timely way. Moreover, risks to achieving our inflation target have increased, while risks to the labor market have receded.”
Barr pointed to the series of economic shocks over the past five years that have pushed up prices — from tariffs to the conflict in the Middle East, continued disruptions from Russia’s war on Ukraine, and, more recently, a surge in investment demand to support the artificial intelligence build-out.
Barr’s comments come after other Fed officials this week have cautioned that it’s getting harder to “look through” the supply-side shocks of tariffs, higher oil prices, and now AI and assume that the inflationary effects of those forces will dissipate on their own.
Traders are pricing the odds of another 25 basis point rate hike at the Fed’s October policy at 71%, according to the CME FedWatch Tool.
Business activity expanded at a stronger pace than expected in September
Readings on the strength of US business activity rose across the board, expanding more than expected across all three major measures.
Manufacturing activity expanded by the widest margin, reading at 57 for the month of September on the S&P Global manufacturing PMI. Economists had expected the sector to expand at 53.7, which would’ve marked a slight slowdown from the previous month’s 53.9 reading.
Readings above 50 indicate expansion, while those below 50 indicate contraction.
The services sector’s expansion read 58.7, per S&P Global, compared with expectations of 55.8 and the previous month’s 56.5.
The composite reading, which combines both manufacturing and services into one economy-wide metric, came in at 58.4. Economists had been looking for 55.3.
US stocks fall as oil, Treasury yields turn green
The US stock market opened mixed on Wednesday as Treasury yields edged higher and fresh AI disruption concerns weighed on some stocks.
The Dow Jones Industrial Average (^DJI) and S&P 500 (^GSPC) slipped 0.2% and 0.6% while the Nasdaq Composite (^IXIC) fell 1% at Wednesday’s open.
The benchmark 10-year Treasury yield (^TNX) added more friction for stocks, edging closer to 5% on Wednesday.
Oil prices rose slightly early Wednesday after hopes for progress between the US and Iran declined, with contracts on Brent crude (BZ=F) climbing 1%.
A fresh wave of AI disruption fears also weighed on some financial, travel, and insurance stocks this week, including LPL Financial Holdings Inc (LPLA), Charles Schwab (SCHW), JPMorgan Chase (JPM), Booking Holdings Inc. (BKNG), Expedia Group Inc. (EXPE), and Arthur J. Gallagher (AJG).
The move comes after Meta’s (META) AI agent app Muse surged to the top spot in Apple’s App Store. The app automates everyday online tasks, raising fresh questions around how AI agents could pressure fee-earning businesses from financial and travel planning to insurance.
On the earnings front, a handful of consumer stocks moved higher after releasing positive earnings earlier Wednesday. Shares of Cracker Barrel Old Country Store (CBRL) rose 3% after the restaurant chain topped Wall Street’s expectations.
Investors are also showing renewed enthusiasm for Quantum computing stocks including IonQ, Inc. (IONQ) and D-Wave Quantum Inc. (QBTS).
McDonald’s bets on hand-breaded chicken, AI drive-throughs to fend off Burger King
McDonald’s (MCD) is making a long-term bet on artificial intelligence, hand-breaded chicken, and a return of 90s-style restaurants to regain customers who left for other chains, like Burger King.
At its investor day in Chicago, the fast food giant unveiled a new set of ambitious goals and investments as part of its growth plan, following a rocky second quarter that resulted in 0.8% US same-store sales growth versus Burger King’s whopping 8.5% growth.
McDonald’s said it plans to invest $8.5 billion through 2036 tosupport restaurant tech updates with rent relief and capital. It intends to deliver roughly $5 billion of that investment by 2030.
Franchisees are encouraged to adopt the plan in phases. One franchisee operator told Yahoo Finance they are skating on thin margins with higher ingredient, labor, and rent costs, making another costly redesign difficult, especially in a high-interest-rate environment.
McDonald’s new restaurant design (Courtesy: McDonald’s)
Oil prices trade below $100 as Trump floats diesel export ban
Oil prices traded below $100 Wednesday morning as President Trump floated a diesel export ban the prior day.
Brent crude futures (BZ=F) traded down fractionally around $96 per barrel while WTI (CL=F)) futures hovered around $90 a barrel.
Trump said Tuesday that he would support banning exports of diesel fuel.
“I’ve said let’s not send out the diesel,” the president said on the sidelines of the UN General Assembly. “We make a lot of diesel. It could have a little bit of an effect on regular automobile gasoline because when you do that, you know, it’s a sort of a flow. It’s a balance.”
The national average price of diesel fuel has surged to an all-time record of $6.52 per gallon, according to AAA,
The future of AI growth rests on Big Tech’s cash flow tripling to $2 trillion
Big Tech’s AI spending boom is carrying an ever-larger share of the US growth story. So far in 2026, investments tied to the AI build-out have been responsible for roughly one-fifth of US economic growth.
This year alone, the four leading “hyperscalers” — Alphabet (GOOG, GOOGL), Amazon (AMZN), Meta (META), and Microsoft (MSFT) — are expected to spend roughly $800 billion in capital expenditures, or 10 times their spend in 2019, only seven years ago, per Goldman Sachs.
Sustaining that investment, however, will require an equally historic expansion in the cash generated by the companies footing the bill, says Apollo chief economist Torsten Sløk. (Disclosure: Yahoo is a portfolio company of funds managed by affiliates of Apollo Global Management.)
Wall Street is expecting major growth in operating cash flow from the hyperscalers. Chart: Apollo Global Management ·Apollo Global Management
Over the past year, the financing for the AI spending race has come increasingly from the debt market, where the hyperscalers are expected to issue $250 billion in global investment-grade debt by the end of 2026.
OpenAI, Anthropic, and SpaceX valuations could dwarf 45 years of IPOs
Yahoo Finance’s Dan Howley reports:
If you’re wondering how huge the AI segment’s march toward the public markets is, look no further than the valuations of the biggest companies in the space.
That is more than the value of all of the initial public offerings from 1980 through 2025, The FT says, citing data from University of Florida Warrington College of Business emeritus professor Jay Ritter.
Morning Joe economic analyst and New York Times Op-Ed contributing writer Steve Rattner illustrated the valuations in a chart he posted on X. He also notes that the historical numbers aren’t adjusted for inflation.
Economic data: MBA mortgage applications, week ended Sept. 18 (-4.1% previously); S&P Global US manufacturing PMI, September preliminary reading (53.6 expected, 53.9 previously); S&P Global US services PMI, September preliminary reading (56 expected, 56.5 previously); S&P Global US composite PMI, September preliminary reading (56 previously)
Earnings calendar: Cintas Corporation (CTAS), Paychex (PAYX), General Mills (GIS), H.B. Fuller Company (FUL), Cracker Barrel Old Country Store (CBRL)
Dollar holds near 2-month high as markets weigh rate hikes, Iran diplomacy
Reuters reports:
The dollar steadied near its strongest level in two months on Wednesday on prospects of interest rate hikes in the near term, while easing oil prices on hopes for a diplomatic breakthrough to end the Middle East war kept investors on edge.
The euro was at $1.1446 in early trading, loitering near its weakest level since late July. Sterling bought $1.3337. The dollar index, which measures the US currency against six rivals, was at 100.56.
The recent barrage of rate hikes and hawkish rhetoric from major central banks has taken centre stage in currency markets as the US-Israeli conflict with Iran drives oil prices higher and fans inflation worries.
Investors are now anticipating further tightening from central banks, with Federal Reserve officials flagging the possibility of more hikes if inflation does not ease.
