US Stocks fall as oil, bond yields rise

US stocks experienced a decline on Wednesday as increased US Treasury yields and Iran's President Masoud Pezeshkian's statement, declaring Tehran would not yield to US pressure, impacted market sentiment. Oil prices surged by nearly 4 percent, while the S&P 500 energy sector index soared after Iran's President's UN address, following US President Donald Trump's warning of potential "annihilation" of Iran.

A survey indicated that US business activity surged to a five-year high in September, prompting a rise in government bond yields and signaling the Federal Reserve's potential interest rate hikes at their October meeting. 2-year Treasury yields surged to their highest since 2024, while 10-year Treasury yields reached their peak since 2007.

Corporate America's response to the Middle East conflict remains a critical factor in the stock market's trajectory. If the conflict is not resolved, investors anticipate persistently higher rates, which will further weigh on equity markets. Lauren Cassidy, chief investment officer at Founders 100 ETF in Dallas, expressed this sentiment, highlighting Meta Platforms' 12 percent gain this week and attributing its growth to the successful launch of its AI assistant, Muse.

Alphabet's Google parent share fell by 3.8 percent, while Amazon, which has blocked Muse from its shopping platform, dropped 2.2 percent. Chip index PHLX declined 1.2 percent, with Nvidia experiencing a 1.5 percent drop. Expedia and Airbnb both saw more than a 7 percent decrease.

The Nasdaq achieved record-high closes in the previous two sessions as Wall Street maintained optimism about AI-related companies. The S&P 500 was less than 2 percent below its record high close on August 13. Investors are also watching the upcoming summit between US President Donald Trump and President Xi Jinping in Washington, where tensions surrounding trade, technology, and Iran's nuclear program are expected to be addressed.

The S&P 500 closed the session down 0.8 percent at 7,706 points, the Nasdaq declined 1.1 percent to 26,936 points, and the Dow Jones Industrial Average slipped 0.7 percent to 51,511 points. Market participants also considered the remarks of Federal Reserve Governor Michael Barr, who indicated that the central bank would likely require further interest rate hikes as inflation remains above the Fed's 2 percent target.

Traders now estimate a 71 percent probability that the Fed will raise rates at its upcoming policy meeting, as per the CME Group's FedWatch Tool.