US stocks fell Wednesday morning as a stronger-than-expected business survey sent Treasury yields higher. The S&P 500 was down about 0.5% and the Nasdaq Composite roughly 1%, while the 10-year Treasury yield moved back above 5%. The stock moves were intraday snapshots, not closing results.
S&P Global’s flash US composite purchasing managers’ index rose to 58.4 in September from 56.0 in August. It was the highest reading since July 2021. A reading above 50 indicates that business activity is expanding.
The result presents investors with a difficult mix. Faster growth can lift corporate sales, but persistent demand and rising prices could keep interest rates higher for longer.
Strong growth keeps rate pressure in focus
The PMI showed rising new orders alongside growing work backlogs and supply delays. S&P Global said those capacity pressures were feeding through to higher prices. That inflation signal helps explain why bond yields rose after an otherwise positive growth report.
The Federal Reserve had already raised its target rate by a quarter percentage point to 3.75%–4% on September 16. Wednesday’s survey adds to the case for watching further rate decisions, although it does not by itself establish the odds of another hike.
The policy-sensitive two-year Treasury yield reached a 27-month high Wednesday. The 10-year yield’s return above 5% shows that pressure is also reaching longer-term borrowing costs. Other forces, including inflation expectations, affect that yield too; one PMI report does not explain its entire move.
Why stocks fell on good economic news
Higher bond yields give investors a more attractive return on Treasuries. They can also raise companies’ financing costs and make expensive stocks harder to justify, especially when much of their expected profit lies years ahead.
That helps explain the Nasdaq’s larger morning decline after an AI-led rally had supported technology shares. Coinpaper has covered both the reaction to the Fed’s hike and the 5% yield threshold facing stocks. Wednesday’s PMI gave investors fresh information about how long borrowing costs might remain elevated.
Strong growth could still help earnings. The market’s immediate concern is whether that benefit will be large enough to offset higher yields and the possibility of further Fed tightening. Wednesday’s closing prices will give a fuller picture than the morning moves.
