From Kiplinger · · 2m
Stock market slides as rate hike odds climb
Treasury yields spike on inflation data, pushing traders to bet on higher interest rates through year-end.
In brief
Treasury yields spike on inflation data, pushing traders to bet on higher interest rates through year-end. Hot inflation data and hawkish Fed commentary sent stocks lower and raised expectations for more rate hikes, with markets now pricing in a 50 basis point increase by December. Originally reported by Kiplinger.
Stocks tumble on inflation fears
The Nasdaq dropped 1.1% to 26,936 as Treasury yields spiked on hot inflation data. The S&P 500 fell 0.8% and the Dow slid 0.7% on the same day.
Treasury yields hit 17-year high
The 10-year Treasury yield jumped 13.7 basis points to 5.104%, its highest level since July 2007. The 2-year and 30-year yields also climbed sharply.
Supply chain backlogs fuel inflation
S&P Global's PMI showed business activity expanded at its fastest pace in five years, but severe supply chain issues are creating backlogs that give companies pricing power. Higher energy costs will add further upward pressure on inflation.
“severe supply chain issues”
Fed official signals more hikes ahead
Fed Governor Michael Barr said further policy adjustments are likely needed to bring inflation down to target. This hawkish commentary lifted rate hike odds significantly.
“further policy adjustments are likely to be needed”
October rate hike odds jump to 66%
CME Group FedWatch now places the odds of an October rate hike at 66%, up from 55% one day prior. Traders expect the federal funds rate to be 50 basis points higher by year-end.
McDonald's hit by inflation and weak traffic
McDonald's shares fell 4.8% today, their worst day since April 2025, as CEO Chris Kempczinski warned that high inflation and flat foot traffic will continue to weigh on growth. The stock is down 12% since August earnings.
“not expecting things to change”
Paychex stumbles on slower growth
Paychex dropped 8.8% after reporting fiscal Q1 earnings growth of 10% and revenue growth of 6%, a slowdown from the prior quarter. The company expects Q2 revenue growth to slow further to 4%.
Analysts see value in beaten-down stocks
Despite today's losses, Argus Research analyst John Staszak maintains a Buy rating on McDonald's, saying the current share price inadequately reflects its attractive dividend and management's efficiency efforts.
“attractive dividend and management's efforts to improve efficiency”
The takeaway
Hot inflation data and hawkish Fed commentary sent stocks lower and raised expectations for more rate hikes, with markets now pricing in a 50 basis point increase by December.
