The 10‑year Treasury yield rose to 5.01 per cent from 4.97 per cent, breaking the 5 % barrier for the first time since 2023. Higher yields raise borrowing costs for the government, businesses and households, which can slow the economy and make bonds look more attractive than stocks.

Investors are also expecting the Federal Reserve to raise the federal funds rate on Wednesday – the first hike in three years – adding another layer of uncertainty for equity markets.

Oil prices added to the strain. Brent crude jumped 3.5 per cent to US$109.35 a barrel, far above the $72 level seen in early July. The surge follows the war with Iran that began in February, which has pushed global oil prices higher.

Companies that rely on discretionary spending felt the pinch. Chipotle Mexican Grill dropped 6.3 per cent, United Airlines fell 2.2 per cent, Dollar Tree slipped 4.2 per cent, and Dave & Buster’s tumbled 19.7 per cent after a weak earnings report.

"The result is a market that must work harder to generate earnings growth just as investors become less willing to pay premium valuations for that growth," said Darrell Cronk, president of the Wells Fargo Investment Institute.

Together, the rise in oil prices and the jump in bond yields are forcing investors to reassess how much they are willing to pay for stocks, shifting some money toward safer assets like Treasury bonds.