U.S. 10-year Treasury yield hits highest level since 2023

U.S. stock markets faltered on Wednesday as the 10-year Treasury yield surged to its highest level in nearly three years, driven by surging oil prices and worries about inflation. The 10-year yield hit 4.814% intraday, marking its peak since November 2023. Dow Jones futures slipped 66 points, S&P 500 futures fell 0.2%, and Nasdaq 100 futures dropped 0.6%.

West Texas Intermediate crude oil exceeded $90 per barrel, the highest since late July, following U.S. airstrikes on Iran. Brent crude was $94.62, roughly $20 higher than pre-conflict levels, raising fears that persistent energy price pressure could complicate central bank policies. Bond yields climbed globally, with Germany's 10-year yield reaching 3.39%, its highest closing yield in a decade and a half.

Borrowing costs in France and Japan also inched up. Higher yields are weighing on the stock market, forcing analysts to discount future earnings more aggressively and reducing price-to-earnings multiples, according to Macquarie Group strategist Thierry Wizman. Global equity markets suffered as Japan's Nikkei 225 fell 2.85%, South Korea's Kospi lost 4%, Australia's S&P/ASX 200 dropped 0.97%, and China's CSI 300 ended 1.38% lower.

European equities also declined, with the Stoxx 600 down 0.49%, Germany's DAX falling 0.7%, the U.K.'s FTSE 100 and France's CAC 40 each about 0.6% lower, and Italy's FTSE MIB shedding 0.5%. Investors are monitoring key data releases and earnings reports, including August ADP private payrolls, factory orders, and the Fed's Beige Book, as well as quarterly results from Hewlett Packard Enterprise, Snowflake, and Broadcom after the market closes.