Dow Jones falls another 300 points ahead of Fed decision as oil, yields remain higher

Benchmark indices on Wall Street had another down day on Tuesday, September 15, as bond yields on the 10-year note hit their highest level in 19 years, while oil prices continued to remain at elevated levels.

The Dow Jones ended the session with losses of 330 points, while at the day's low, the index was down over 500 points. The S&P 500 fell 0.5%, while the Nasdaq saw a 0.8% drop, with the losses being curtailed by buying seen in some AI-linked names like AMD and Qualcomm.

Yield on the US 10-year treasury hit an intraday high of 5.041% on Tuesday, the highest level since 2007, before ending at the 5% mark. The rise in yields come on fears of further oil supply disruptions in case the West Asia conflict continues.

Brent crude remained above the $107 a barrel mark after Reuters reported citing sources that Saudi Arabia has informed some of its customers in Europe that some of the crude cargoes scheduled for delivery in end-September, have been cancelled due to the closure of the East-West pipeline. There is still no clarity on when will operations resume at normal capacity, although US Energy Secretary Chris Wright said that it is a matter of days that normalcy is restored once again.

All eyes today are on the US Federal Reserve and the CME FedWatch tool is projecting a 94% probability of the central banking raising rates for the first time since 2023 by 25 basis points. More so, the street will be watching out for any potential commentary from Fed Chair Kevin Warsh on the road ahead for monetary policy, which has not been forthcoming in his previous address.

Analysts watching the Fed believe that this policy is of significant consequence as the market is not prepared for the Fed to either hold rates or deliver a dovish hike, both of which could raise questions on Warsh's credibility and the Fed's inflation fighting narrative.

A recent survey by Bank of America also showed that one-third of the fund managers surveyed have cited a disorderly rise in bond yields as the biggest tail risk to the market ahead of an AI bubble or a second inflation wave.