Global equities extended their losing streak on Tuesday, continuing the selloff from the prior session. U.S. stocks declined, while elevated oil prices added further pressure to the Treasury market, pushing 10-year yields near levels not seen in 19 years and dampening risk appetite. As of writing, Dow futures fell 0.27%, S&P 500 futures slipped 0.15%, and Nasdaq futures dropped 0.07%. The MSCI global equity index lost 0.28% on Tuesday, following a 0.65% decline in the previous session.

In Europe, the Stoxx 600 index dropped 0.2%, with the European technology sector index falling 0.40% after already sliding over 2% the day before. Deutsche Bank shares declined more than 2%, mirroring weakness in U.S. banking stocks after Bank of America warned that trading revenue for the quarter could remain largely flat. European bond markets showed mixed performance. In Asia, the MSCI benchmark index for the region fell for a fourth consecutive session, marking the longest losing streak since May, with roughly three-quarters of its components trading lower.

Oil prices hovered near $110, with Brent crude climbing toward $107 per barrel, extending September gains to 18%. This followed a new wave of attacks by Yemen's Iran-aligned Houthi rebels on Saudi Arabia, while the group continued to consolidate positions along the Red Sea coast in western Yemen. Thierry Wizman, global FX and rates strategist at Macquarie Group, noted: "A few weeks ago, the market might not have had enough reason to believe oil would keep rising, but now it does, because Iran's strategic military doctrine has shifted toward preemptive attacks." He added that "the U.S. government, after the midterm elections, may have no choice but to return to direct military action."

Treasury yields continued their relentless climb, with the 10-year note rising 2 basis points to 5.01%, retreating slightly from earlier highs touched at levels not seen since 2007. Over the past month, yields have steadily risen as investors digest multiple pressures simultaneously, including heightened rate hike expectations, substantial bond issuance, resilient economic growth, and concerns about the U.S. long-term fiscal outlook. Simon White, macro strategist at Bloomberg, indicated that Treasury yields are approaching a critical inflection point. Historically, around these levels, stocks and bonds may amplify portfolio risk in tandem, suggesting the market could be entering a new regime where both bond and equity volatility rise simultaneously, with credit spreads potentially widening further. If yields break above 5.25%, market structure could undergo more pronounced changes.

High bond yields are now dominating market dynamics, bringing surging energy costs and rising debt levels back into focus for traders. The AI trade, which has been a major driver of this year's equity rally, has also cooled as the market intensely debates whether artificial intelligence could pose catastrophic risks. Louis Puga of Societe de Gestion Prevoir commented: "The bond selloff is certainly weighing on tech and growth stocks. There are essentially two worlds right now: one where corporate balance sheets and profits remain healthy, and another where governments maintain massive fiscal deficits, constantly pressuring the bond market."

The weakening bond market has also elevated the importance of Wednesday's Federal Reserve rate decision. Money markets currently price in a probability of over 90% for a rate hike this week. John Velis, Americas macro strategist at BNY Mellon, stated: "The market currently expects the Fed to hike nearly four times in total by the end of next year." He added: "We believe the U.S. economy may not be able to sustain such high interest rates for long, and the Fed may begin considering reducing policy restraint in the second half of next year." If the Fed ultimately opts to hold rates steady, or if Chair Kevin Warsh signals a more dovish tightening path than anticipated, investors may demand higher yields to compensate for inflation risk. Jenny Zeng of Allianz Global Investors remarked: "After years of inflation running above target, the Fed's credibility is being tested." She noted that Warsh's recent comments have left little doubt that restoring price stability remains the top policy priority, with the September meeting serving as a key test of that commitment. Mabrouk Chetouane of Natixis Investment Managers observed: "Different types of risk premiums are simultaneously piling onto the bond market. In this environment, the stock market has stopped rising and begun to stall. For a rebound from here, two conditions are needed: clearer policy guidance from the Fed tomorrow, and strong third-quarter corporate earnings."

Gold extended its decline below the $4,300 level. In Japan, the selloff was concentrated in long-term bonds after the government considered setting a target for mid-term defense spending at 3.5% of GDP. German bond yields also climbed to their highest level in over 17 years, reaching 3.56%, as traders increased bets on further European Central Bank rate hikes. The market now expects the ECB's deposit rate to rise to 3.45% by the end of 2027, up from the current 2.50%. The U.S. dollar was poised for a second consecutive session of gains. Bitcoin moved lower as optimism over near-term progress on U.S. cryptocurrency regulation legislation waned, with related crypto stocks also slipping in pre-market trading. Rising oil prices further reinforced expectations that the Fed might hike this week, while higher rates typically diminish the appeal of non-yielding gold.

The copper market experienced its largest delivery in nearly four weeks at LME warehouses, as prices retreated to around $14,000 per ton. After surging to record highs last week, copper has pulled back significantly. At that time, traders diverted supply to the U.S. ahead of expected tariffs on refined copper, creating shortages elsewhere globally. However, these tariffs have yet to materialize. As of writing, three-month copper futures on the London Metal Exchange traded at $14,030 per ton. On Monday, LME warehouses received the largest copper delivery in four weeks. The three-month contract flipped to a premium of $85.75 per ton over spot, a market structure known as a "contango," typically indicating ample supply.

Chip stocks have become a "painful trade" as Wall Street shifts focus to the next beneficiary. An AI safety storm is suddenly rewriting Wall Street trading strategies. Investors are recalculating an alternative scenario: if model training slows, computing power trades could cool, while identity management, data governance, and cyber defense might see a larger spending cycle. Evercore ISI analyst Kirk Materne believes that regardless of how quickly AI agents enter enterprises, they must be protected, governed, and monitored. Therefore, even if AI training slows, structural demand for cybersecurity and certain infrastructure software remains. Jefferies analyst Joseph Gallo expects the agentic AI security market to remain in its early stages, with initial business signals possibly emerging in late 2026, while significant revenue contributions are more likely after 2027. He suggests identity security vendors could be among the earliest beneficiaries, as enterprises must control machine identities, access permissions, and data invocation scopes as AI agents multiply.

Macro Risk Advisors LLC warned that a Fed rate hike, potentially as early as this week, could trigger a pullback in the S&P 500, as declining corporate margins hurt earnings outlooks while the market prepares for a tightening cycle. Founder and CEO Dean Curnutt stated that if a hike lands on Wednesday, the market will face increased pressure. He wrote: "We expect the S&P 500 to correct 8% to 10%, with a potential second leg down in December." He added that a rate hike would "squeeze margins for companies that cannot pass on costs," while delivering a volatility shock to a market unprepared for it. Curnutt noted that the current market setup resembles what investors saw in 2018, when the S&P 500 peaked in September before plummeting 10% in October and November combined. He cautioned that the "Santa Claus rally did not materialize" that year, with another downturn in December ultimately bringing the index down nearly 20% from its peak.

Meanwhile, Bank of America technical analysts remain bullish on the long-term rally, arguing the S&P 500 could break above 8,000 points despite recent market and macro headwinds testing investor confidence. After breaking out of a weekly bullish pennant formation in early August, the benchmark index has already reached the bank's prior 12-month target of 7,741 points. Technical strategist Paul Ciana wrote in a client note that as long as the index holds key support at 7,500, the broader uptrend remains intact. Ciana noted that recent price consolidation is forming a potential bullish flag on the daily chart, with a decisive close above the 7,760-7,770 resistance zone confirming the pattern. A successful breakout would reopen upside targets of 8,000 and 8,234, with a longer-term forecast of 8,541. Ciana also warned that failing to hold the 7,504-7,500 support area would signal a major technical breakdown, potentially opening an initial pullback to 7,314-7,294. Further weakness would increase the risk of a deeper correction toward the rising 200-day moving average around 7,200, or even down to the key 7,000 breakout zone.

On the individual stock front, Dave & Buster's Entertainment, which combines arcade and dining offerings, saw its shares plunge 17% after reporting weaker-than-expected second-quarter results. Revenue came in at $544.1 million, below the FactSet consensus estimate of $556.8 million, while adjusted EBITDA of $98.9 million also missed expectations of $120.4 million. The company also reported an unexpected adjusted loss of 27 cents per share, versus analyst expectations for earnings of 18 cents per share. Enova, an online lending and credit services provider, saw its stock plummet over 15% after announcing it was withdrawing its regulatory application required for the acquisition of Grasshopper Bancorp. However, the company reaffirmed its third-quarter and full-year guidance and indicated plans to accelerate its share buyback pace. Sysco, a food distribution wholesaler serving restaurants, hospitals, and schools, announced an offering of 12.3 million common shares at $81 per share, sending its stock down nearly 2%. Online e-commerce platform Yiji saw its shares rise 3% after Oppenheimer upgraded the stock to "Outperform," citing artificial intelligence technology in virtual shopping as a potential growth catalyst. The firm also set a price target of $90, implying a 21% upside from Monday's closing price.