On Wednesday, robust US September PMI data fueled investor concerns that the Federal Reserve could implement another rate hike. According to the CME FedWatch tool, the probability of the Fed holding rates steady at 3.75%-4.00% during its October meeting stands at 30.3%, while the likelihood of a 25-basis-point increase has risen to 69.7%. Looking further ahead, the odds of the Fed maintaining the current range through December are 6.5%, with a 38.7% chance of a cumulative 25-basis-point hike and a 54.8% probability of a 50-basis-point increase by year-end.

Inflation worries sent US Treasury yields soaring, with the 10-year note hitting 5.135%, its highest level since July 2007, and marking the largest single-day jump since April 7, 2025. The 2-year Treasury yield also climbed to 4.947%, reaching levels not seen since May 2024.

US Equities

At the closing bell, the Dow Jones Industrial Average fell 351.27 points, or 0.68%, to 51,512.42. The S&P 500 dropped 58.25 points, or 0.75%, to 7,706.39. The Nasdaq Composite declined 308.24 points, or 1.13%, to 26,936.04. SK hynix Inc (NASDAQ: SKHY) slid more than 3%, while Meta Platforms Inc (NASDAQ: META) gained 1%, and Amazon.com Inc (NASDAQ: AMZN) dropped 2%. The Nasdaq Golden Dragon China Index closed down 1.44%, with Alibaba Group Holding Ltd (NYSE: BABA) falling 4.7%.

European Equities

Germany’s DAX30 fell 188.16 points, or 0.73%, to 25,411.85. The UK’s FTSE 100 edged up 1.92 points, or 0.02%, to 10,710.25. France’s CAC40 declined 31.50 points, or 0.39%, to 8,123.41. The Euro Stoxx 50 slipped 23.87 points, or 0.38%, to 6,300.85. Spain’s IBEX35 dropped 160.47 points, or 0.81%, to 19,631.33, while Italy’s FTSE MIB fell 79.33 points, or 0.15%, to 52,016.50.

Asian Markets

South Korea’s KOSPI composite rose 0.9%, while India’s BSE Sensex 30 gained 0.4%.

US Dollar Index

The dollar index, which measures the greenback against six major currencies, advanced 0.49% to close at 101.096 in late trading. At the New York session close, the euro traded at 1.1387 dollars, down from 1.1442 the prior session, and the pound stood at 1.3243 dollars, lower than the previous 1.3335. The dollar strengthened to 158.27 yen, up from 157.50, and rose to 0.8244 Swiss francs from 0.8212. Against the Canadian dollar, the greenback climbed to 1.4097 from 1.4068, and versus the Swedish krona, it reached 9.9169 from 9.8487.

Cryptocurrency

Bitcoin slipped below the $85,000 threshold, last quoted at $84,609. Ethereum fell more than 2% to $2,690.

Crude Oil

West Texas Intermediate crude for November delivery rose $1.64, or 1.81%, to settle at $92.16 per barrel on the New York Mercantile Exchange. Brent crude for November delivery jumped $3.83, or 3.86%, to close at $103.08 per barrel.

Precious Metals

Spot gold was quoted at $4,286.81 per ounce, while spot silver stood at $64.45 per ounce.

Macro Developments

The US Treasury announced it will repurchase up to $6 billion in longer-dated government bonds on Thursday, marking the first operation since Treasury Secretary Bessent expanded the buyback program aimed at curbing rising borrowing costs. This repurchase ceiling is triple the initially disclosed $2 billion from early August. That original plan was scrapped in an unexpected August 19 announcement, when the Treasury said it would "at least double" the scale of such operations. Following the announcement, 20- to 30-year Treasuries, which are the targets of Thursday’s buyback, extended their declines, with the 30-year yield briefly touching 5.38% intraday, near the roughly 5.40% peak seen earlier this month and the highest since 2007. Responding to criticism that the move amounts to market intervention and doesn't address fundamental fiscal challenges, Bessent defended the expansion, saying he acted because he believed market prices were "deviating" from equilibrium levels. The Institute of International Finance warned Wednesday that "financial engineering" cannot resolve underlying debt dynamics, noting that interventions like secondary-market purchases “may offer temporary relief but fail to address the structural factors driving debt growth.”

US business activity accelerated to its highest level in over five years in September, driven by a surge in new orders, though strong demand also strained supply chains and pushed up prices. S&P Global reported Wednesday that the flash US composite PMI rose to 58.4, the highest since July 2021, up from 56.0 in August. The increase reflects solid growth across both the services and manufacturing sectors. S&P Global noted that the reading is consistent with the US economy expanding at roughly a 5% annualized pace. The firm also pointed to a significant jump in backlogged orders and supply delays, "indicating insufficient operating capacity and fueling further price increases." Chris Williamson, chief business economist at S&P Global Market Intelligence, said, "Business activity in both manufacturing and services is clearly very strong at the moment. However, excluding the pandemic period, this growth is accompanied by one of the most severe supply chain bottlenecks in nearly 20 years of survey history." Supply constraints largely stem from the US-Israeli war against Iran, now in its seventh month.

White House National Economic Council Director Hassett criticized recent remarks from Fed officials supporting further rate increases, expressing concern over continued tightening when core inflation is already near 2%. "Why raise rates again?" he questioned, while taking issue with officials not appointed by Trump who have recently voiced support for more hikes. Hassett said Fed Chair Warsh is managing a "highly politicized Federal Reserve," and restoring the central bank's independence is a key task. He also criticized that some senior Fed officials have remained on the board even after leaving their leadership roles, specifically naming Powell and Barr, saying this diverges from past practices following leadership transitions. Several Fed officials have recently struck a hawkish tone. Barr indicated that further rate increases may be necessary to bring inflation back to the 2% target, while Collins and Musalem also expressed support for additional hikes. The Fed's latest economic projections show 16 officials expect at least one more rate increase this year.

Stock-Specific News

Reports indicate that Taiwan Semiconductor Manufacturing Co Ltd (NYSE: TSM) has confirmed another round of wafer price increases, with hikes ranging from approximately 3% to 6%. Supply chain sources reveal that TSMC's 8-inch fab utilization exceeds 100%, and its 45nm and below process nodes are running at full capacity, with order visibility extending to 2030. The company has confirmed that starting January 2027, it will adjust Wafer Out prices by process node, with increases of roughly 3-6%. Advanced process nodes are set to see higher hikes, while mature and specialty processes will be negotiated individually based on product, utilization, and customer circumstances. The Arizona fab, reflecting high manufacturing costs, will keep its foundry quotes at elevated levels. TSMC declined to comment on market rumors.

Microsoft President Brad Smith stated that the company supports establishing independent safety assessment bodies for AI deployment to advance AI safety. He emphasized that AI safety cannot rely solely on one or two model companies, noting that while firms like OpenAI and Anthropic are critical, software companies responsible for controlling AI agents and monitoring their behavior are equally important. Smith said Microsoft has participated in AI safety evaluations through a safety committee established jointly with partner OpenAI and supports the implementation of manual shut-off mechanisms for advanced AI systems. He argued that AI safety requires layered protections, and key control should not be concentrated in a single place. Additionally, Smith said Microsoft still plans to proceed with its previous plan to use 200 megawatts of computing capacity at an AI data center in the UAE, adding that the current environment remains appropriate for investing in the Middle East. Regarding the company's 2030 carbon-negative goal, he acknowledged that Microsoft may need to adjust its previously set path.