On Wednesday, all three major US stock indexes fell as inflation worries drove a sharp rise in Treasury yields, fueling concerns that the Federal Reserve may need to raise interest rates further. The Dow dropped 352.10 points, or 0.68%, to close at 51,511.59, while the S&P 500 lost 58.61 points, or 0.75%, to 7,706.03. The Nasdaq declined 308.24 points, or 1.13%, to 26,936.03. Utilities and consumer discretionary sectors led the market lower, each slipping more than 1%.

Optical communication and memory chip stocks mostly declined, with SanDisk, Corning, Coherent, and SK Hynix falling over 3%, while Micron Technology dropped more than 2%. Western Digital gained about 2%. Gold mining stocks were broadly down, with Pan American Silver and Harmony Gold sliding over 5%. McDonald's fell nearly 5%, marking its largest single-day drop since April 2025. Among the "Magnificent Seven" tech giants, most declined, though Meta rose over 1%, Microsoft and Tesla edged up slightly, Google dropped over 3%, Amazon fell more than 2%, Nvidia slid over 1%, and Apple dipped marginally.

The jump in Treasury yields weighed heavily on equities, triggered by hotter-than-expected Purchasing Managers' Index (PMI) data. The 10-year Treasury yield touched 5.135%, its highest level since July 2007, and posted its biggest single-day gain since April 7, 2025. The 2-year Treasury yield reached 4.947%, the highest since May 2024, intensifying bets that the Fed will hike rates at least once more this year, especially after Fed Governor Michael Barr called for "further policy adjustments" to curb inflation.

Speaking on Wednesday, Fed Governor Michael Barr stated that "further policy adjustments may be necessary" to bring inflation under control. "Economic growth is strong, and the labor market remains solid, but inflation is above our 2% target and has not been moving toward that goal in a timely manner," he said. "Moreover, risks to achieving the inflation target have risen, while risks to the labor market have diminished."

According to the CME FedWatch tool, following these developments, the probability of a 25-basis-point rate hike in October climbed above 66%, up from 55.4% the prior day and just 8.8% a month ago.

By market close, light crude oil futures for November delivery on the New York Mercantile Exchange rose $1.64 to settle at $92.16 per barrel, a gain of 1.81%. Brent crude for November delivery climbed $3.83 to close at $103.08 per barrel, up 3.86%.

During the annual United Nations General Assembly meeting in New York on Tuesday, US President Trump mentioned that American and Iranian officials held a three-hour discussion, which he described as a "very good talk." Speaking at the UN earlier on Tuesday, Trump indicated he faced a "big decision" regarding Iran: either reach a deal with Tehran or "obliterate" the nation.