US equity indexes pulled back from record highs on Wednesday after Federal Reserve meeting minutes signaled a preference for further policy tightening, coinciding with a US Treasury auction of 10-year notes that saw yields rise sharply. The Nasdaq Composite dropped 0.2% to close at 27,538.69, while the S&P 500 slipped 0.2% to 7,801.77. The Dow Jones Industrial Average lagged the broader market, declining 0.7% to 51,179.87. Materials and industrials sectors drove the losses after the Nasdaq and S&P 500 hit fresh records on Tuesday.
Minutes from the Federal Open Market Committee's Sept. 15-16 meeting indicated that most participants believed another hike in the target range for the federal funds rate would likely be appropriate by year-end. Many committee members argued that a higher policy path was prudent on risk-management grounds to insure against inflation staying above target. Several participants characterized the current policy rate as "not restrictive or only mildly restrictive." The Fed had raised the target range for the federal funds rate during that meeting.
The US Treasury's auction of $39 billion in 10-year notes resulted in a high yield of 5.30%, a significant increase from approximately 4.83% in the prior auction. The bid-to-cover ratio improved to 2.77 from 2.71, suggesting stronger demand. This sale followed $58 billion in 3-year notes sold on Tuesday and preceded a $22 billion 30-year bond offering scheduled for Thursday.
Treasury yields moved in mixed directions following the auction results. The 30-year rate climbed 3.2 basis points to 5.67% after reaching 5.73%, its highest level since 2002. The 10-year yield maintained gains of 1.5 basis points at 5.29% after hitting an intraday high of 5.37%, also its strongest level since 2002. Conversely, the 2-year yield decreased by 2.1 basis points to 4.77%.
A survey by the Federal Reserve Bank of New York revealed that US consumers' one-year-ahead inflation outlook hit its highest point in over three years in September. Median one-year inflation expectations increased by 0.3 percentage points to 3.9%, the highest reading since May 2023. The three-year outlook ticked up to 3.3% from 3.2%, while five-year inflation views held steady at 3%. Labor market expectations "mostly improved," according to the survey.
In geopolitical developments, Al Jazeera reported that US Vice President JD Vance has urged Iran to make a "meaningful" reduction in its uranium enrichment capacity as part of an agreement to end the war.
US commercial crude oil stocks, excluding inventories in the Strategic Petroleum Reserve, fell by 3.2 million barrels in the week ended Oct. 2. This drop contrasted with a 900,000-barrel gain in the previous week and a 1.9-million-barrel increase expected in a Bloomberg-compiled survey. The front-month US West Texas Intermediate crude oil contract declined 0.6% to $88.89 per barrel, while global benchmark Brent rose 0.3% to $100.90 per barrel.
The Financial Times reported Tuesday that SpaceX is seeking to raise approximately $40 billion in financing led by Apollo Global Management to purchase Nvidia chips.