Overnight US stocks | Probability of a Fed rate hike in October rises to 69.7%; the three major indices decline; SK Hynix (SKHY.US) falls over 3%.

Wednesday, US September PMI data came in strong, and investors worried that the Federal Reserve may raise interest rates further. According to CME's "FedWatch," the probability that the Fed will keep rates unchanged at 3.75%-4.00% at its October meeting is 30.3%, while the probability of a 25-basis-point hike is 69.7%. The probability that the Fed will keep rates unchanged at 3.75%-4.00% through December is 6.5%, the probability of a cumulative 25-basis-point hike is 38.7%, and the probability of a cumulative 50-basis-point hike is 54.8%. Inflation concerns drove US Treasury yields sharply higher, with the 10-year yield hitting 5.135%, the highest level since July 2007, and marking its largest single-day gain since April 7, 2025. The 2-year Treasury yield hit its highest level since May 2024, at 4.947%. [US stocks] At the close, the Dow Jones Industrial Average fell 351.27 points, or 0.68%, to 51,512.42; the S&P 500 fell 58.25 points, or 0.75%, to 7,706.39; the Nasdaq Composite fell 308.24 points, or 1.13%, to 26,936.04. SK Hynix (SKHY.US) fell more than 3%, Meta (META.US) rose 1%, and Amazon.com, Inc. (AMZN.US) fell 2%. The Nasdaq Golden Dragon China Index closed down 1.44%, and Alibaba Group Holding Limited Sponsored ADR (BABA.US) fell 4.7%. [European stocks] Germany's DAX30 fell 188.16 points, or 0.73%, to 25,411.85; the UK's FTSE 100 rose 1.92 points, or 0.02%, to 10,710.25; France's CAC40 fell 31.50 points, or 0.39%, to 8,123.41; the Euro Stoxx 50 fell 23.87 points, or 0.38%, to 6,300.85; Spain's IBEX35 fell 160.47 points, or 0.81%, to 19,631.33; Italy's FTSE MIB fell 79.33 points, or 0.15%, to 52,016.50. [Asian stocks] South Korea's KOSPI rose 0.9%, and India's Mumbai 30 index rose 0.4%. [US dollar index] The US dollar index, which measures the greenback against six major currencies, rose 0.49% on the day and closed at 101.096 in late foreign exchange trading. As of late New York foreign exchange trading, 1 euro traded at 1.1387 dollars, down from 1.1442 dollars the previous trading day; 1 pound traded at 1.3243 dollars, down from 1.3335 dollars the previous trading day. 1 dollar traded at 158.27 yen, up from 157.50 yen the previous trading day; 1 dollar traded at 0.8244 Swiss francs, up from 0.8212 Swiss francs the previous trading day; 1 dollar traded at 1.4097 Canadian dollars, up from 1.4068 Canadian dollars the previous trading day; 1 dollar traded at 9.9169 Swedish kronor, up from 9.8487 Swedish kronor the previous trading day. [Cryptocurrencies] Bitcoin fell below the 85,000 dollar mark, trading at 84,609 as of publication; Ethereum fell more than 2% to 2,690 dollars. [Crude oil] Light crude futures for November delivery on the New York Mercantile Exchange rose 1.64 dollars to close at 92.16 dollars per barrel, a gain of 1.81%; London Brent crude futures for November delivery rose 3.83 dollars to close at 103.08 dollars per barrel, a gain of 3.86%. [Precious metals] Spot gold was reported at 4,286.81 dollars per ounce; spot silver was reported at 64.45 dollars per ounce. [Macro news] US expands Treasury buyback program, market questions whether fiscal pressure can be resolved. The US Treasury said it will buy back up to 6 billion dollars of longer-term government bonds on Thursday, the first such operation since Treasury Secretary Bessent expanded the buyback program, aimed at curbing the recent rise in borrowing costs. The maximum size of this buyback is three times the 2 billion dollars initially announced to investors in early August. That original plan was canceled in a surprise announcement on August 19, when the Treasury said it would "at least double" the size of such operations. After the announcement, 20- to 30-year US Treasuries, the targets of Thursday's buyback, extended their declines, with the 30-year Treasury yield rising intraday to 5.38%, close to the roughly 5.40% high earlier this month and the highest level since 2007. Facing criticism that the move amounted to market intervention and could not solve fundamental fiscal challenges, Bessent defended expanding the Treasury buyback scale by saying he acted because he believed market prices were "deviating" from equilibrium levels. The Institute of International Finance (IIF) warned on Wednesday that trying to use "financial engineering" cannot resolve underlying debt dynamics, and that interventions such as buying securities in the secondary market "may bring temporary relief, but cannot address the structural factors driving debt growth." US business activity rises to highest in more than five years, inflation pressures intensify. Driven by a surge in new orders, US business activity accelerated in September to its highest level in more than five years; however, strong demand also put pressure on supply chains and pushed prices higher. S&P Global, Inc. said on Wednesday that the preliminary US September composite PMI rose to 58.4, the highest since July 2021, up from 56.0 in August. The rise in the PMI reflected strong growth in both services and manufacturing. S&P Global, Inc. said the PMI data was consistent with the US economy growing at an annualized rate of about 5%. The firm also noted that backlogs of work and supply chain delays increased sharply, "indicating insufficient operating capacity and driving prices further higher." Chris Williamson, chief business economist at S&P Global, Inc. Market Intelligence, said: "At present, business activity in both manufacturing and services is clearly very strong. However, excluding the pandemic period, this growth is accompanied by one of the worst supply chain bottlenecks in nearly 20 years of survey history." The supply constraints mainly stem from the war between the United States and Israel against Iran, which is now in its seventh month. Hassett criticizes recent Fed officials' comments supporting rate hikes, calls for restoring "independence." Hassett, director of the US White House National Economic Council, criticized on Wednesday recent Fed officials who support further rate hikes, saying it is worrying for the Fed to continue tightening policy when core inflation is already close to 2%. Hassett said, "Why raise rates again," and questioned recent comments by some officials not appointed by Trump supporting more rate hikes. Hassett said Fed Chair Warsh is managing a "highly politicized Federal Reserve," and restoring the Fed's independence is an important task facing him. Hassett also criticized some senior Fed officials for continuing to serve at the Fed even after leaving their original leadership positions. He named Powell and Barr, arguing that this situation differs from past conventions after changes in Fed leadership. Recently, several Fed officials have signaled hawkish views. Barr said further rate hikes may be needed to bring inflation back to the 2% target; Collins and Musalem also expressed support for further rate hikes. The Fed's latest economic projections show that 16 officials expect at least one more rate hike this year. [Individual stock news] Report: Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) foundry prices confirmed to rise again, by about 3% to 6%. According to reports, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR foundry prices are confirmed to rise again. Supply chain personnel revealed that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, whose 8-inch fab capacity utilization exceeds 100% and whose processes below 45 nanometers are fully loaded, has order visibility extending to 2030, and has confirmed that starting in January 2027 it will adjust Wafer Out prices by process, with increases of about 3% to 6%. It is said that price increases for advanced processes are higher, while mature and specialty processes are negotiated individually based on product, utilization rate, and customer conditions. The Arizona plant in the United States reflects high manufacturing costs, and foundry quotes remain high. Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR did not respond to market rumors. Microsoft Corporation president: AI safety cannot rely only on a few model companies. Microsoft Corporation (MSFT.US) President Brad Smith said Microsoft Corporation supports independent safety assessment institutions for artificial intelligence deployment to promote AI safety development. He said AI safety cannot rely only on one or two model companies; although model companies such as OpenAI and Anthropic are crucial, software companies responsible for controlling AI agents and monitoring their behavior are equally important. Smith said Microsoft Corporation has participated in AI safety assessments through a safety committee established with partner OpenAI, and supports setting up manual shutdown mechanisms for advanced AI systems. He believes AI safety requires multiple layers of protection, and key control should not be concentrated in only one place. In addition, Smith said Microsoft Corporation still plans to advance its earlier plan to use 200 megawatts of computing capacity at an AI data center in the UAE, and believes now is still an appropriate time to invest in the Middle East. Regarding Microsoft Corporation's goal of achieving carbon negative emissions by 2030, he said the company may need to adjust the path it previously set.