U.S. stock index futures dropped sharply early Wednesday, led by a steep slide in Dow Jones Industrial Average contracts, as escalating Middle East tensions pushed crude oil past $100 a barrel and benchmark Treasury yields hit their highest levels in over two decades.
U.S. stocks gave back a portion of a record-setting session as investors confronted a dramatically harsher bond and energy market. At 10:53 a.m. ET, the Dow Jones Industrial Average dropped 565.20 points, or 1.10%, to 50,956.08. The S&P 500 fell 53.28 points, or 0.68%, to 7,765.65, while the Nasdaq tumbled 229.73 points, or 0.83%, to 27,370.15, according to market data on index performance.
Iran Attacks Tankers as Crude Oil Surges
Energy markets climbed after Iran intensified attacks on tankers in the Persian Gulf in response to efforts to restore crude shipments through the Strait of Hormuz. Benchmark Brent crude jumped more than 5% to trade above $105 a barrel in early overseas and domestic trading sessions. West Texas Intermediate crude hovered around $89.56 to $92.71 a barrel.
Production disruptions compounded the pressure. Sustained high energy costs threaten to feed directly into manufacturing, transportation, and consumer prices.
Treasury Yields Climb to Multi-Decade Highs
The 10-year U.S. Treasury yield climbed above 5.36% early Wednesday before easing to about 5.32%, while latest market data put the 10-year yield at 5.306%, up 0.025 percentage point, marking a level not touched in roughly two decades.
If earnings remain strong, and the idea is that they probably will, if expectations are met and/or higher, that is going to sustain this rally — despite the fact that rates are higher,
Courtney Garcia, senior wealth advisor at Payne Capital Management, told CNBC. It's not going to derail the market.
Technology Equities and Digital Assets Retreat
The Roundhill Magnificent Seven ETF was down about 1%. Nvidia approaches a $6 trillion market capitalization, meaning relatively modest percentage moves can translate into large changes in total market value.
Digital assets faced heavy selling pressure alongside equities. Bitcoin fell 3.07% to about $82,962 after trading near $85,700 overnight. Ether dropped 5.14% to $2,561.
Federal Reserve Weighs Rate Path and Economic Data
Markets turned their attention toward upcoming monetary policy signals. According to the Federal Open Market Committee minutes, Most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,
while officials also noted they would approach each meeting with an open mind and base future decisions on incoming data. U.S. rate futures priced in an 80.6% chance of no rate change and a 19.4% chance of a 25-basis-point rate hike at the October monetary policy meeting.
The key events Wednesday included the Federal Reserve minutes and a $39 billion Treasury auction of 10-year notes, which would show how investors are responding to current yields.
