US equities came under renewed pressure on Wednesday as higher Treasury yields and a surge in oil prices added to concerns over inflation and the outlook for interest rates, according to a report by CNBC.
The Dow Jones Industrial Average fell 323 points, or 0.6%, while the S&P 500 declined 0.4% and the Nasdaq Composite lost 0.6%.
The moves came as the 10-year US Treasury yield climbed to 4.857%, its highest level since November 2023. Yields had already pushed above the closely watched 4.8% threshold on Tuesday as the renewed rise in energy prices fuelled inflation concerns.
Treasury yields moved higher despite the US government announcing plans to significantly increase its purchases of longer-dated debt. The Treasury said it would triple its latest buyback operation to $6bn, following an announcement last month that it planned to at least double the scale of its longer-term debt repurchases.
The increase was smaller than some investors had anticipated, however. Some on Wall Street had expected Treasury Secretary Scott Bessent to authorise purchases of as much as $7bn or $8bn, limiting the impact of the announcement on bond yields.
For hedge fund managers and other macro investors, the combination of higher yields and rising energy costs presents a renewed challenge after equities had largely resisted pressure from both factors.
Oil provided another source of pressure, with escalating tensions between the US and Iran raising concerns about further disruption to energy supplies from the Middle East.
Brent crude, the international benchmark, rose about 2% and briefly moved above $101 a barrel for the first time since July. West Texas Intermediate also gained around 2%, trading above $95 a barrel.
The latest rally in crude follows another sharp advance in the previous session, when rising energy prices contributed to losses across the three major US equity benchmarks.
The combination of expensive oil and higher borrowing costs could prove particularly important for hedge funds running macro, equity long-short and multi-strategy portfolios, as investors reassess the potential impact of renewed inflationary pressure on monetary policy and corporate earnings.
