Four key reasons why Dow Jones fell 350 points, Nasdaq sold off on Wednesday

Benchmark indices on Wall Street witnessed profit booking at higher levels on Wednesday, September 23, as a combination of a rise in bond yields coupled with a rebound in oil prices from lower levels led to a sell-off.

The Dow Jones ended 350 points lower on Wednesday, reversing everything it gained in the previous session. The S&P 500 declined 0.75%, while the Nasdaq retreated from record high levels to end with losses of 1.1%.

The 10-year bond yield saw its biggest single-day jump since April 7, 2025, surging to levels of 5.135%, the highest since July 2007. The two-year yield jumped to 4.947%, the highest since May 2024, while the 30-year yield is now nearing the 5.4% mark, the highest since June 2007.

Four important reasons were behind the rise in bond yields on Wednesday:

First, the economic activity data presented a very strong picture of the economy, thereby raising fears once again of the Federal Reserve potentially hiking interest rates again.

The S&P Global Services PMI for September rose to 58.7, the highest in five years, versus 56.5 in August. The Manufacturing PMI print stood at 56.7, the highest in four years. According to S&P Global, this is the fastest growth in business activity recorded since 2015, excluding the Covid-19 resumption rebound.

Second, Federal Reserve Governor Michael Barr warned of further rate hikes by saying that further policy adjustments need to be made to ensure that inflation comes down in a timely fashion.

Barr went on to add that price stability is crucial to sustainable, durable growth and maximum employment.

Following Barr’s address, the probability of the Federal Reserve hiking rates by 25 basis points again on October 28 jumped to 70% from 55.4% earlier, according to the CME FedWatch tool.

Third, a treasury auction of the five-year note witnessed poor demand with the sale concluding at a yield of 5.033%, well above the previous six-auction average of 4.186%. Central banks, indirect bidders in this auction, also purchased lower than their previous averages.

Lastly, a rebound in oil prices from lower levels after Iranian President Pezeshkian’s United Nations General Assembly speech and concerns over a potential ban on diesel exports put further pressure on bond yields.

All eyes will now be on the outcome of the meeting between Chinese President Xi Jinping and US President Donald Trump. The US and China have already extended their Busan trade truce to January 10 as soon as Xi landed in Washington.