US Equity Indexes Fall, Treasury Yields Rise as Probability of Fed Rate Cut Fades

03:54 PM EDT, 08/21/2025 (MT Newswires) -- US equity indexes fell ahead of the close on Thursday, while yields on government bonds rose as bets favoring a monetary policy pause in September more than tripled from a week ago.

The Nasdaq Composite declined 0.3% to 21,116.4, the S&P 500 fell 0.4% to 6,373.1, and the Dow Jones Industrial Average was 0.3% lower at 44,787.5.

All sectors except energy and materials were lower in the final hour of trading, with consumer staples in the steepest decline.

The August flash reading of US manufacturing conditions from S&P Global rose to 53.3 from 49.8 in July, compared with an expected reading of 49.7 in a survey compiled by Bloomberg. The index indicates a return to expansion in the sector.

By Thursday afternoon, the odds of a 25-basis-point cut in September stood at 74%, down from 92% a week ago, according to the CME FedWatch Tool. The remaining 27% probability is for the rates to remain unchanged, versus 7.9% a week earlier.

"The Fed is worried about inflation accelerating as companies pass tariffs on to consumers," David Russell, global head of market strategy at TradeStation, told CNBC. "The [FOMC] minutes [released Wednesday] are consistent with Powell's hawkish comments last meeting. The bulls might get some cold water splashed in their faces at Jackson Hole."

Most US Treasury yields rose, with the 10-year yield up 3.2 basis points to 4.33% and the two-year rate climbing 4.8 basis points to 3.79%.

Walmart's (WMT) results also weighed on investor sentiment as a 4.8% drop in its shares was among the worst in the S&P 500 and the Dow after the retailer's fiscal Q2 adjusted earnings lagged analysts' expectations.

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