Key keywords: bond yield surge, 10-year US Treasury yield, US equity market pullback, Fed interest rate hike expectations, tech stock selloff, September FOMC meeting, summer stock rally, risk asset repricing The latest surge in US Treasury yields has brought the two-month long summer equity rally to an abrupt halt in Wednesday morning trading, as investors reprice risk assets amid rising bets that the Federal Reserve will push interest rates higher and keep them elevated for far longer than previously expected. The 10-year Treasury yield climbed to 4.36% this session, its highest level since the 2008 global financial crisis, up more than 30 basis points from the start of August. Through most of July and early August, US equities posted strong gains, with the S&P 500 rising 7.2% and the Nasdaq Composite jumping 11.4% as investors bet that cooling inflation would prompt the Fed to end its rate hike cycle and begin cutting rates as early as March 2024. That optimism faded sharply last week following the release of the Fed’s July meeting minutes, which showed most voting members see persistent upside risks to inflation and are open to additional rate hikes if price pressures fail to ease further. Stronger-than-expected retail sales data and lower-than-forecast initial jobless claims released earlier this week further reinforced the view that the US economy remains resilient, giving the Fed more room to keep monetary policy tight. Long-duration tech stocks have borne the brunt of the selloff, as higher risk-free rates significantly reduce the present value of their future cash flows. Over the past five trading sessions, the Nasdaq 100 has dropped 3.8%, with leading AI and tech stocks including Nvidia, Apple and Tesla falling 4.2%, 5.1% and 6.7% respectively, erasing all gains posted in August. Even defensive sectors like consumer staples and healthcare have not escaped the pressure, pushing the S&P 500 down 2.1% week-to-date, on track for its worst weekly performance in two months. Markets are now laser-focused on the upcoming September 19-20 FOMC meeting, with CME FedWatch data showing the probability of a 25 basis point rate hike next month has jumped from 12% a week ago to 38% as of Wednesday. Analysts warn that if the 10-year yield breaks above the 4.5% threshold, the S&P 500 could see a 10% correction before the end of the quarter, as elevated borrowing costs hit corporate profit margins and reduce the attractiveness of equities relative to fixed income assets.