The Dow Jones Industrial Average declines 2.5% from its record as December Fed rate hike probabilities drop to 33%.
The Dow Jones Industrial Average slipped to 53,400, down 105 points on the session and 2.5% below its August 5 record near 54,750. The decline follows a sharp drop in market-implied odds of a Federal Reserve rate hike by December, now at 33%, down from near certainty on August 10.
Long-term Treasury yields surged to 5.3%, the highest since June 2007, despite reduced tightening expectations. Analysts attribute the move to a rising term premium, reflecting higher compensation demanded for holding long-duration bonds rather than policy shifts.
The equity market, which had previously pushed for Fed restraint, has retreated in the nine sessions since its record high, signaling concerns over discount rates driven by the long end of the yield curve.