US equity markets saw considerable volatility, with stocks giving back earlier gains due to hawkish Federal Reserve comments and surging Treasury yields. The Dow Jones Industrial Average was down 0.06% at 52,179.23, the S&P 500 fell 0.02% to 7,435.72, and the Nasdaq Composite rose 0.19% to 25,170.38 on Friday, following earlier rallies driven by strong earnings from Amazon and Microsoft. However, a deeper sell-off occurred on Wednesday, with the Dow plummeting 1,153.18 points (2.19%) to 51,594.14, its worst single-day performance since April 2025. The Nasdaq Composite fell 433.97 points (1.74%) to 24,442.94, marking its sixth consecutive session in negative territory, and the S&P 500 dropped 112.63 points (1.52%) to settle at 7,316.15.
Rising bond yields significantly impacted markets. The yield on benchmark US 10-year notes rose 6.35 basis points to 4.727%, the highest since January 2025. The 30-year bond yield climbed 5.14 basis points to 5.2584%, reaching its highest level since mid-2007. Traders are now pricing in a 69% probability of a rate increase at the Fed's September meeting. This yield spike, alongside a lack of detail from Fed Chair Warsh after an on-hold decision, led to a sharp steepening in the Treasury curve, fueling investor concerns about inflation and further rate actions.
The technology sector, particularly chip stocks, faced severe pressure. The NASDAQ 100 was dragged into correction territory, and the Philly semiconductor index slumped by 5.33%. In Korea, the AI bubble burst caused significant stress for investors, with the Kospi index down nearly 40% from its June peak, wiping about $2 trillion off its value. Samsung Electronics and SK Hynix, which account for nearly half of the Kospi, saw a savage sell-off, with the index shedding over 17% in three days. Many retail investors, who had used margin loans and leveraged ETFs, experienced losses of 70% to 80%, leading to a drop in margin debt from a record $27 billion to $33.2 trillion. The Korean finance ministry has decided to limit access to leveraged ETFs to curb market volatility.
