24.09.202611:09 Analisis Forex & Kajian: What lies behind market fears

What scared the S&P 500 more — the surge in 10-year Treasury yields to highs not seen since 2007, or the first downward revision of corporate profit forecasts by Wall Street analysts in 23 weeks? These events are interconnected, and the fact remains: the broad stock index plunged at the fastest pace since July, failing to reach record highs.

US business activity dynamics

Good news from the economy has again turned bad for the stock market. S&P Global's fastest expansion of US business activity since 2021 became a selling trigger for the S&P 500. PMI data showed employment and prices rising at the fastest pace in four years — an ideal environment for a federal funds rate hike. The futures market immediately raised the odds of another Fed tightening in October from 54% to 70%. The probability that the central bank will hike twice in 2026 rose from 40% to 55%.

This marked the start of the quickest rally in Treasury yields since April 2025. 10-year rates reached their highest level since 2007, which negatively affects US corporate earnings and drives money out of equities into Treasuries.

Revisions to profit forecasts

Unsurprisingly, Wall Street cut earnings forecasts for S&P 500 issuers for the first time since April. The longest winning streak for the indicator since September 2021 was broken. Investors remembered Morgan Stanley's warning about a 7% correction in the broad index if fundamentals come under threat and energy prices resume rising, pushing the Fed toward tighter policy.

Brent did spike on comments from Iran at the UN that reopening the Strait of Hormuz is impossible without a full lifting of sanctions. Although the bears later regained the initiative in North Sea crude, oil prices remain elevated, reinforcing the Fed's aggressive stance on inflation. Another FOMC official, Michael Barr, called for additional federal funds rate increases.

Thus, investor fears about Fed tightening outweighed the euphoria over Donald Trump's support for AI. Moreover, AI itself may be an inflation driver, which pushes Treasury yields higher and weighs on corporate profits — and the strength of the US economy is more of a hindrance than a help to stocks.

Technically, on the daily chart, the S&P 500 has returned to the upper band of its downward trading channel. A bounce off support at 7,690 would be a reason to add previously formed long positions; a breakout would be a trigger for short-term selling.