Wall Street Declines Further as Treasury Yields Continue to Climb

US stocks closed lower on Tuesday, pressured by higher yields and rate hike expectations from the Fed. In early trading today, equity futures edged higher ahead of the Feds pivotal policy decision, with markets pricing a 92% probability of a 25-bps rate hike and watching for signals on further increases in October and December. Markets remain under pressure from rising oil and bond yields, with the 10-year Treasury yield holding above 5%.

Oil prices pulled back today, with Brent falling 1% to $107.54 and WTI declining 1.3% to $104.48, after US crude inventories reportedly increased by 7.1 million barrels last week versus expectations for a 1.6 million-barrel draw. However, ongoing Middle East tensions continue to support oil prices, particularly following the closure of Saudi Arabias East-West pipeline. The outlook remains highly dependent on the speed of repairs and security around Gulf shipping routes, with further disruptions potentially tightening supply and pushing prices higher.

In the UK, inflation rose to 3.1% year-on-year in August, up from 2.9% in July and marking the first reading above 3% since March, in line with expectations. The increase was mainly driven by higher fuel costs, adding further pressure on the Bank of Englands inflation outlook.

Gold remains below $4,350 as traders stay cautious ahead of the Fed‘s policy decision, with a softer US dollar providing limited support. The Fed is widely expected to raise rates by 25 bps, but markets will focus on the updated dot plot and Chair Kevin Warsh’s comments for clues on future policy.