It’s a sea of red with stocks facing pressure from rising yields and profit-taking action in mega-cap technology stocks and semiconductors.

The 10-year yield rose to as high as 5.07%, its highest level since 2007, while the 30-year touched 5.37%.

This comes as Fed Governor Michael Barr signaled that additional interest rate hikes are needed to bring down sticky inflation.

"Economic growth is strong and the labor market is solid, but inflation is above our 2 percent target and not clearly trending toward target in a timely way. Moreover, risks to achieving our inflation target have increased, while risks to the labor market have receded.”

Meanwhile, the Treasury is set to buy back $2 billion of its own debt tomorrow. The debt buyback is small, but operations like this reduce the supply of bonds in the market, hence adding liquidity to the banking system.

Themes

Eight sectors trade lower with Utilities (XLU) and Consumer Discretionary (XLY) holding the widest losses as oil-and-rate sensitive stocks come under pressure. On the other hand, Energy (XLE) is holding the strongest gain as oil prices climb back toward $100 per barrel.

IonQ, Inc. (IONQ) is holding onto gains this afternoon after the company demonstrated real-time quantum error correction across 408 logical qubits using a single standard CPU with almost no added delay.

This is a milestone for the company and the industry because:

• Error correction is critical for building quantum computers that are fault-tolerant
• Running on a single CPU builds a path to scale quantum computing commercially

Economic Data

The September PMI Index rose 2.4 points to a 62-month high of 58.4 from 56.0 in August. This is the fastest expansion since July 2021 and the fourth consecutive month of growth. In addition, manufacturing PMI jumped 3.1 points to 57, its strongest improvement since May 2022, while services increased 2.2 points to 58.7, a 59-month high.

On the other hand, Atlanta Fed Business expectations showed firms’ year-ahead unit cost expectations drifting higher in September.