Stocks closed lower Wednesday as Treasury yields spiked on hot inflation data. This, along with hawkish commentary from one Federal Reserve official, lifted odds for an October rate hike, with futures traders now expecting the federal funds rate to be 50 basis points higher than its current range by year’s end.
At the close, the blue-chip Dow Jones Industrial Average was down 0.7% at 51,511 and the S&P 500 was 0.8% lower at 7,706. The tech-heavy Nasdaq Composite, which closed at a record high on Tuesday, slumped 1.1% to 26,936.
Stocks took a hit as Treasury yields jumped on data from S&P Global that shows rising price pressures. The 2-year Treasury yield jumped 11.8 basis points to 4.885%, while the yield on the 10-year Treasury spiked 13.7 basis points to 5.104%, its highest level since July 2007. The 30-year Treasury yield was 8.9 basis points higher at 5.391%.
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S&P Global’s Flash Purchasing Managers’ Index (PMI) for September showed business activity expanded at its fastest pace in five years. But “severe supply chain issues” are creating massive backlogs, which gives companies pricing power, says Chris Williamson, chief business economist at S&P Global Market Intelligence. And higher energy costs “will add further to the upward pressure on selling prices and inflation in the coming months.”
The PMI data follows the September Fed meeting, where the central bank hiked interest rates for the first time in three years on concerns that inflation remains elevated.
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And more rate hikes could be coming down the pike. Earlier today, Fed Governor Michael Barr — a voting member of the Federal Open Market Committee (FOMC) — said at an event in Chicago that “further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion.”
At last check, CME Group FedWatch placed the odds of an October rate hike at 66%, up from 55% one day ago. The probability that the Fed will hike again in December is currently at 53%.
McDonald’s suffers worst day in 2025 on inflation worries
High inflation and flat foot traffic is weighing on restaurant industry growth, said McDonald’s (MCD) CEO Chris Kempczinski at the burger chain’s 2026 Investor Day. And in an appearance on CNBC’s “Squawk on the Street,” Kempczinski warned that he’s “not expecting things to change.”
In the second quarter, McDonald’s reported mid-single-digit growth for both its top and bottom lines, while U.S. same-store sales edged up 0.8%.
Shares are now down 12% since those results were released in early August, including today’s 4.8% drop, the Dow Jones stock‘s worst single-day performance since April 4, 2025. But analysts think this creates an attractive risk/reward setup.
“We believe that the current share price inadequately reflects an attractive dividend and management’s efforts to improve efficiency and increase the store count,” says Argus Research analyst John Staszak, who has a Buy rating on the blue chip stock.
Paychex sinks on slower growth
Paychex (PAYX) also had its worst day in over a year, with the industrial stock‘s 8.8% loss today putting it at the bottom of the S&P 500.
The company, which provides HR, payroll and benefits services for small and medium-sized businesses, said Wednesday that fiscal 2027 first-quarter earnings rose 10% year over year to $1.34 per share, while revenue was up 6% to $1.6 billion.
The results beat Wall Street estimates but marked a slowdown from the previous quarter, when Paychex said earnings per share rose 11% from the year prior and revenue grew 17%.
The company expects fiscal Q2 revenue growth to be even slower, up 4% year over year. Chief Financial Officer Robert Lewis Schrader says this is a result of a difficult comparison to the previous year and two one-off items recognized in Q2 of fiscal 2026.
