U.S. Treasury yields briefly broke above 5%, while oil prices and the dollar rose. The dollar index reached a two-week high, and major stock indexes closed lower.
The dollar index rose to a two-week high on Tuesday as expectations strengthened that the Federal Reserve would announce its first rate hike in more than three years. Markets had priced in a 25-basis-point hike at the FOMC, while the yield on the U.S. 10-year Treasury briefly topped 5%, reaching its highest level since 2007.
Brent crude closed at $108.40 and WTI at $105.56, with loading stoppages and shutdowns at Libyan oil fields cited as contributing factors. Developments involving Yanbu port on Saudi Arabia’s Red Sea coast reignited concerns about supply risks.
The three major U.S. stock indexes fell for a second consecutive day. The Dow closed down $328.09, the S&P 500 fell 34.25 points and the Nasdaq dropped 204.84 points, while semiconductor stocks moved in mixed directions. Cryptocurrency-related stocks came under heavy selling pressure. Gold fell as the dollar strengthened and yields rose.
In foreign exchange markets, the yen weakened into the 155 range, while the euro traded near $1.154. As the dollar advanced, spot gold fell 0.1% to $4,293.29 per ounce, and December gold futures closed down 0.4%.