The U.S. dollar continued to strengthen against major currencies on Wednesday, with the dollar index rising 0.36% and reaching highs last seen in July. The dollar's gains were fueled by expectations of slower interest rate cuts, supported by rising Treasury yields and resilient U.S. economic data. The yield on benchmark U.S. 10-year notes increased by 3.4 basis points (bps) to 4.24%, reaching a 3-month high of 4.26%.
Based on the CME Fedwatch tool, markets are currently pricing in a strong likelihood of a 25-basis-point interest rate reduction by the Federal Reserve. The probability of such a cut stand at 90.9%, while the odds of rates remaining unchanged are negligible at 9.1%.
European stock markets are trading in negative territory, with the Germany 40 down by more than 1% so far this week. Markets await preliminary Purchasing Managers' Index (PMI) data from major eurozone countries as concerns about regional growth persist. Business activity is expected to remain below the expansion threshold for the month and this could pressure the European Central Bank (ECB) to further cut interest rates.
U.S. stock market benchmarks US 30, US 500 and US tech 100 declined on Wednesday, pressured mainly by the technology sector while investors grapple with rising Treasury yields.
In corporate news, Apple Inc. shares experienced a significant decline of 2.2%, leading a broader tech downturn, following a pessimistic update on iPhone 16 demand from renowned analyst Ming-Chi Kuo. Tesla shares declined by nearly 2% on Wednesday despite reporting a surprise increase in third-quarter earnings. However, the positive earnings news provided a temporary boost to the stock price in after-hours trading. While the company's sales volume rose by 6%, this growth was significantly lower than the 50% annual increases seen in the past.
Market participants may see some price action later today as several key economic indicators are released. These include US, EU and UK flash manufacturing and services PMIs along with US jobless claims and new home sales. Additionally, speeches by the Bank of England Governor, ECB President, and a Federal Reserve FOMC member, along with other key FOMC speeches, could also influence market sentiment.
US 500
U.S. stocks slumped on Wednesday, weighed down by tech stocks as Treasury yields continued to climb amid concerns about a shallower outlook for the Federal Reserve’s rate cut cycle.
Apple Leads Tech Decline Apple Inc. fell more than 2%, leading the broader tech sector lower after analyst Ming-Chi Kuo from TF International, known for his accurate Apple predictions, delivered a downbeat forecast on iPhone 16 demand.
AT&T shares rose over 4% following a $4.4 billion goodwill impairment charge related to its business-wireline unit. Coca-Cola saw its stock fall 2% after reporting weaker demand, although higher prices helped the company beat earnings expectations for the quarter.
The economic data calendar was relatively quiet, with September’s existing home sales as the main release. FOMC member Michelle Bowman is also scheduled to speak, offering potential insights on future monetary policy as expectations shift toward a more gradual easing by the Fed in the coming months.