US stocks fell on Tuesday as investors awaited the Federal Reserve’s policy decision, while Treasury yields climbed to multi-year highs. The Dow Jones Industrial Average dropped 328.09 points, or 0.63%, to 52,093.11. The S&P 500 fell 0.45% to 7,585.73, while the Nasdaq Composite declined 0.78% to 25,981.57.
The US 10-year Treasury yield briefly reached 5.041%, its highest level since 2007, before easing to around 5%. Higher yields have weighed on equities amid concerns that the Iran war and elevated oil prices could keep inflation higher for longer.
Some AI-related stocks recovered from Monday’s sell-off. Coherent and AMD gained around 2%, while Qualcomm advanced more than 4%.
Oil prices extended their gains after Saudi Arabia shut a key pipeline bypassing the Strait of Hormuz. Brent rose almost 3% to US$108.75 a barrel, while WTI climbed more than 4% to US$105.83.
Attention is now firmly on the Federal Reserve, which announces its rate decision at 4am Thursday AEST. Futures markets are pricing more than a 90% chance of a 25-basis-point increase from the current 3.5%–3.75% target range.
Australian Market Outlook
Australian shares are set to open higher, with S&P/ASX 200 futures up 31 points, or 0.4%, to 8,691. The positive start comes despite further weakness on Wall Street and rising global bond yields, with investors positioning ahead of the Fed decision. Oil prices and the Iran war also remain in focus, with higher energy costs adding to inflation concerns. The Fed’s decision and guidance on the outlook for interest rates are likely to set the direction for global markets and the ASX over the coming sessions.
