The Federal Reserve raised its benchmark interest rate to 3.75%-4.00% on Wednesday, the first increase since July 2023, and signaled further tightening before the end of the year. In response, the 10 year Treasury yield settled above 5% for the first time since 2007, fueled by heavy government borrowing and debt financed AI investments. The September dot plot indicates 12 policymakers project at least one rate hike in 2026, with four projecting two.

Minneapolis Fed President Neel Kashkari stated that inflation pressures have broadened beyond the oil price shocks of the Iran war, while Chair Kevin Warsh pointed to price gains above 3% in various goods and services. This yield environment pressures the Nasdaq 100 and the S&P 500, which remains 2.5% below its August record after adding $11 trillion in market value since March. A move in the 10 year yield above 5.10% is identified as a level that could trigger a stock market correction.