Market Overview
Global bond yields surged to multi-decade highs, primarily driven by US Treasuries, in response to robust US economic data, hawkish remarks from the Federal Reserve, and a weak five-year Treasury auction. This significant rise in yields triggered a broad sell-off across US equity markets, with rate-sensitive technology and consumer discretionary sectors experiencing notable declines. Simultaneously, crude oil prices jumped amidst persistent geopolitical tensions, further fueling inflation concerns. For the upcoming APAC session, these developments signal a challenging environment, with Australian shares set to open lower and the Australian dollar weakening.
Markets
US equity indices closed lower on 23-SEP-26. The Dow Jones Industrial Average (^DJI) ended the day down 1.03% at 51,511.59, while the S&P 500 (^GSPC) fell 0.76% to 7,706.03. The technology-heavy Nasdaq Composite (^IXIC) also declined, closing down 0.69% at 26,936.04. This negative performance in US markets points to a challenging start for APAC trading, with ASX 200 Futures pointing down 104 points, or 1.2%, to 8706.
In the bond market, US Treasury yields soared. The US 10-Year Treasury Yield (^TNX) stood at 5.114%, up 15.10 basis points (bp), while the US 30-Year Treasury Yield (^TYX) was at 5.401%, up 10.50 bp.
Crude oil prices, which rallied during the US session amidst geopolitical tensions, ultimately ended lower for the day. Brent crude (BZ=F), after briefly trading above $100 a barrel, closed at $98.22, down 1.04%. U.S. West Texas Intermediate (WTI) crude (CL=F) finished at $92.66, down 2.04%.
The Australian Dollar (AUDUSD=X) weakened, trading at 0.7042, down 1.08%, marking its lowest level since early August.
What Drove Markets
The primary driver of market movements was the surge in global bond yields to levels not seen in over a decade. This was fueled by several factors:
- Strong US Economic Data: S&P Global PMI readings indicated an acceleration in US business activity for the fourth consecutive month in September, reaching its fastest pace of growth since July 2021. Price pressures intensified to their highest since October 2022, primarily driven by higher fuel and transport costs.
- Hawkish Federal Reserve Sentiment: Federal Reserve Governor Michael Barr stated that “further policy adjustments are likely to be needed,” reinforcing expectations for continued monetary tightening.
- Weak Treasury Auction: A poorly received US $US70 billion five-year note auction, which came in at a 5.033% yield (the highest auction yield since 2006), exacerbated the bond market sell-off. This result pushed five-year US yields above 5% for the first time since 2007.
- Heightened Fed Rate Hike Expectations: Following these developments, market participants increased the probability of a quarter-point rate increase by the US Federal Reserve in late October to approximately 68.6%, up from 55.4% the previous day.
Crude oil prices rallied during the US session amid ongoing geopolitical tensions and an exchange of strong rhetoric between US President Donald Trump and Iran’s President Masoud Pezeshkian. Despite speculation of a potential US diesel export ban, which weighed on diesel futures, broader supply concerns supported oil’s upward trajectory.
The rise in Treasury yields weighed heavily on US equity markets, particularly rate-sensitive sectors like technology and consumer discretionary. Several credit-sensitive AI hyperscalers, including Alphabet (GOOGL), Oracle (ORCL), and Amazon (AMZN), saw declines. Chipmakers such as NVIDIA (NVDA), Broadcom (AVGO), and Micron (MU) also fell as investors took profits following earlier rallies.
In other developments, US Treasury Secretary Scott Bessent confirmed that the US and China agreed to extend “the Busan agreement” until January. Meta Platforms (META) shares soared following the success of its new AI agent, Muse, which has become the top free app on Apple’s App Store since its September 8 release. Muse has partnered with PayPal and fintech platform Plaid. JPMorgan Chase and Bank of America pulled down the S&P 500 financial sector amid worries over potential disruptions to financial services from AI. Additionally, Blackstone shelved a deal as buyers spurned old private equity stakes, and Altman and Amodei called for global cooperation on AI.
Stocks to Watch
- Meta Platforms (META) closed at $744.10, up 1.02%, as its new AI agent, Muse, garnered significant demand.
- Alphabet (GOOGL) closed at $337.83, down 3.80%; Oracle (ORCL) closed at $144.56, down 3.11%; and Amazon (AMZN) closed at $249.27, down 2.24%. These “credit-sensitive AI hyperscalers” declined due to the bond market sell-off.
- Chipmakers NVIDIA (NVDA) closed at $225.51, down 1.47%; Broadcom (AVGO) closed at $354.99, down 2.62%; and Micron (MU) closed at $1,071.88, down 2.22%, as investors took profits.
- JPMorgan (JPM) closed at $337.53, down 0.73%, and Bank of America (BAC) closed at $56.02, down 0.32%, contributing to declines in the S&P 500 financial sector.
- Travel sector stocks Airbnb (ABNB) closed at $149.58, down 10.35%, and Booking Holdings (BKNG) closed at $155.90, down 5.07%, as surging yields impacted the sector.
- NextDC received a ‘buy’ rating and upgraded guidance from Citi.
- GenusPlus inked a $160 million battery storage deal.