US equities opened sharply lower on Wednesday, with the Dow Jones Industrial Average shedding roughly 280 points, as oil prices surged past the $100-per-barrel threshold for the first time in months. The move reignited inflation worries and prompted investors to reassess the likelihood of another Federal Reserve interest-rate increase.
The S&P 500 slipped 0.25%, while the Nasdaq Composite fell 0.42%, as rising energy costs threatened to keep consumer prices elevated. Brent crude climbed more than 2% to break above $100, its highest level since July, amid escalating tensions between the US and Iran that raised concerns about potential disruptions to Middle East energy supplies. West Texas Intermediate futures also remained above $91 a barrel, extending gains from the previous session when higher energy prices contributed to losses across major indexes.
Tuesday's session had already seen the Dow drop 1.2%, its worst performance in nearly three weeks, with the S&P 500 and Nasdaq each falling 0.6% and 0.3%, respectively. The renewed oil rally has also pushed Treasury yields higher, as investors factor in the inflationary impact of costlier energy. The 10-year Treasury yield briefly touched 4.8% on Tuesday, adding pressure on equities.
Fed rate path in focus
With oil prices climbing, market participants are increasingly pricing in a hawkish move from the Federal Reserve. According to CME FedWatch data, futures now imply a 62.4% probability of a 25-basis-point rate hike at the Fed's meeting next week. Policymakers have remained focused on inflation, and the latest energy-driven price pressures could complicate their decision.
Upcoming economic data will be critical in shaping the central bank's next move. The Producer Price Index is scheduled for release on Thursday, followed by the Consumer Price Index on Friday. The CPI report is particularly significant as it represents the final major inflation reading available to policymakers before the September meeting.
Investors are also monitoring a planned US Treasury announcement on bond buybacks. The Treasury has indicated it would purchase more longer-dated bonds to help address rising yields. Any reaction in the bond market could influence equities, as higher government bond yields tend to weigh on stock valuations.
Tech and individual movers
Technology and semiconductor stocks were under pressure, with Intel down 0.95% and Nvidia slipping 0.28%. Apple shares fell 0.11% ahead of its anticipated announcement of a foldable iPhone. Investors remain focused on artificial intelligence stocks, though concerns have emerged about companies involved in financing transactions with one another, raising questions about the sustainability of revenue growth across parts of the AI industry.
Elsewhere, Dow Inc. rose in trading after a report suggested the chemicals company was considering exiting its $20 billion partnership with Saudi Aramco. Meta shares gained 4.7% after the company launched an AI assistant capable of performing tasks such as sending emails, selling a car, and booking travel.
The broader weakness extended beyond the US. Europe's Stoxx 600 fell 0.69%, with major indexes in the UK, Germany, France, and Italy also trading lower. In Asia, Japan's Nikkei 225 declined 0.19%, while South Korea's Kospi rose 1.4% and China's CSI 300 gained 0.3%.
For more on the recent tech selloff, see Intel and AMD's September slide. Also, check out Nvidia's drop on AI spending worries and the Dow's gains amid tech weakness.
This article is for informational purposes only and does not constitute financial advice.
