Dow Jones falls over 1,600 points in four sessions as oil, yields spook Wall Street

Benchmark indices on Wall Street had another down day on Thursday, September 10, after a steep sell-off in the US bond markets, coupled with a sharp jump in crude oil prices soured investor sentiment for yet another day.

The Dow Jones fell 300 points on Thursday, taking its cumulative four-day drop to over 1,600 points. The S&P 500 and the Nasdaq fell 0.6% each, and have relatively outperformed the Dow during the course of the week by not falling as much.

Why Did The Bond Markets Sell-Off On Thursday?

Bond markets across the globe sold-off steeply on Thursday, led by the US, with the 10-year bond yield surging to 4.96%, the highest level since November 2023.

The US 30-year yield has also crossed last month’s pre-intervention levels, now nearing the mark of 5.4%, a new high since 2007. The two-year bond yield, more sensitive to policy decisions, surged to 4.6%, the highest since 2024.

Treasury markets were also spooked because the US ended up buying fewer longer-dated bonds in comparison to what was promised earlier. Bonds worth $5.19 billion were repurchased compared to the maximum $6 billion action announced. Treasury Secretary Scott Bessent said that fewer bids were received and they intend to only buyback bonds cheaper.

Germany’s 10-year yield surged to the highest level since 2009, while the 30-year yield in UK closed in on the 6% mark, the highest level since 1998.

Why Did Oil Prices Surge On Thursday?

Brent crude crossed the $107 a barrel mark, while the West Texas Intermediate, or the US crude crossed the mark of $100 with the market now fearing a prolonged war between the US and Iran, which is already into its seventh month.

There have also been unconfirmed reports about the Houthis capturing a key Yemeni port city and moving closer towards the Bab Al-Mandeb strait, a key transit point currently for oil exports with the closure of the Strait of Hormuz.

How Was The US Wholesale Inflation Print?

The August PPI figures reported last evening were largely in-line with expectations. Wholesale inflation rose 0.4% month-on-month, in-line with estimates, while the year-on-year figure of 5.4% was slightly ahead of the 5.3% estimate.

Core PPI also increased by 0.2%, although that turned out to be better than the 0.3% estimate. Yet, the probability of the US Federal Reserve increasing interest rates next week has surged to 72%.

All eyes are now on the retail inflation print that will be reported at 6 PM this evening Indian Standard Time.