On Wednesday, September 20, 2023, U.S. stock indexes declined significantly, with the S&P 500 Index down 0.75%, the Dow Jones Industrial Average down 0.68%, and the Nasdaq 100 Index falling 0.85%. This downturn was largely attributed to a surge in bond yields, with the 10-year Treasury note reaching a 19-year high of 5.13%. Following a stronger-than-expected U.S. manufacturing PMI, the likelihood of a Federal Reserve rate hike during the upcoming FOMC meeting increased to 69% from 53%.
Additionally, crude oil prices rose by over 1%, leading to higher inflation expectations and negatively impacting market sentiment. The OECD also updated its forecasts, raising the U.S. GDP estimate for 2026 by 0.2% to 2.2% while lowering the inflation forecast by 0.1% to 3.6%.
Mortgage applications in the U.S. fell by 1.5% for the week ending September 18, with the average 30-year fixed-rate mortgage climbing to a 2.25-year high of 7.12%. Markets are currently factoring in a 69% chance of a 25 basis point Fed rate increase at the next meeting on October 27-28.
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