Bond yields surge as Wall Street fears more potential Federal Reserve rate hikes

Following the tech rally over the past two trading days, major US indices have reclaimed a portion of their recent gains by the middle of the week. Concerns over interest rates spurred a sell-off in the bond markets, pushing the yield on the 10-year US benchmark bond to its highest level since 2007. The Dow Jones Industrial Average, tracking large-cap stocks, slipped 0.6% to 51,534 points.

The widely-diversified S&P 500 Index fell 0.7% to 7,711. The tech-heavy Nasdaq Composite dropped 1.1% to 26,950 points. The Nasdaq 100, an index of the 100 largest non-financial companies by market capitalization, also slipped about 1% to 30,450. The Nasdaq reached a second consecutive record high on Wednesday. However, geopolitical uncertainties in the Iran crisis and rising oil prices dampened market sentiment on Wednesday.

Tech stocks in particular were weighed down by comments from Federal Reserve Director Michael Barr, who expects further interest rate hikes. The Federal Reserve had raised its benchmark interest rate for the first time in over three years last week. During a conference call with regional bank officials in Chicago, Barr said, "In my baseline scenario, further policy adjustments will be required to bring inflation back to target."

Preliminary data from S&P Global's Purchasing Managers Index for manufacturing and services sectors fueled inflation concerns, with the economy reaching its strongest pace in five years in September. However, it noted that this growth came with significant supply chain bottlenecks, indicating that businesses are gaining pricing power, which could raise inflation worries, according to S&P economist Chris Williamson.