Dow Jones falls 1,300 points in three sessions as bond markets, oil prices add to pressure

Benchmark indices on Wall Street had another down day on Wednesday, September 9, even as an increased bond market buyback program, failed to prevent a sell-off in US treasuries. Rising crude oil prices added to the negative sentiments.

The Dow Jones fell another 400 points on Wednesday, taking the three-day fall to 1,300 points. The S&P 500 and the Nasdaq fell 0.6% and 0.5% respectively.

Crude oil prices continued to rise on Wednesday with Brent Crude crossing the mark of $101 a barrel. The moves comes after Iran said that it will continue to escalate the war till the time the US keeps attacking its infrastructure and its forces in the Strait of Hormuz and although there is economic pain, they have no option left but to fight.

US President Donald Trump also told reporters that oil and gas prices will come down but only after the mid-term elections in November, which are still two months out. Diesel and Gasoline prices are already at record high levels in the US.

On Wednesday, the US Treasury announced an increased bond buyback program after stating earlier that it will "at least double" the pace of the buybacks of longer-dated securities. The treasury will now buy $6 billion worth of bonds on Thursday, compared to the initial $2 billion announced last month. Subsequent bond buying programs, announced until December, are worth at least $4 billion.

While analysts were already anticipating a bigger quantum, they expected a higher figure. Instead of bond prices rising, the yields continued to rise even after the announcement, with the US 10-year now at 4.85%, the highest level since November 2023. The 30-year bond yield is also back at 5.3%, very close to last month's pre-intervention levels of 5.33%.

On the flip side, the US Dollar weakness continues as the US treasury continues to focus on strengthening the Japanese Yen. The US Dollar index on Wednesday closed at a seven-month low, registering its lowest close since February 17.

The action on Wall Street in terms of cues begins today as the wholesale price inflation (PPI) data will be reported at 6 PM IST, which will be one of the two data points that the Fed will be watching out for before its policy decision next week.

Along with the inflation data, initial jobless claims, existing home sales will also be reported, so will be quarterly results from Oracle Corp., Adobe Inc., and Macy's.