After a stronger-than-expected reading on the US services sector fueled anticipation that the Federal Reserve will hold interest rates higher for longer, stocks fell and Treasury yields rose.

The Nasdaq 100 dropped about 1% and the S&P 500 finished below 4,500, with Apple Inc. spearheading a decline in big tech amid rising bond rates. The business also shut down after reading a news story stating Chinese companies forbade employees from using iPhones for business purposes. The yield on two years was over 5%. Bets on a Fed boost in November increased to around 60%, according to swap contracts. Following a rise that forced Japan and China to defend their currencies, the dollar pushed higher.

Stocks continued to decline after the Fed's Beige Book reported that the US economy and job market grew more slowly in July and August and that many businesses anticipate a widespread slowdown in wage increases in the near future. The US services index, published by the Institute for Supply Management, hit 54.5 in August, a six-month high. The figure exceeded all predictions in the survey of economists, and readings above 50 imply expansion.

Susan Collins, president of the Federal Reserve Bank of Boston, indicated that further tightening may still be necessary and that policymakers will need to exercise patience as they evaluate economic data to determine their next moves. When authorities revise their predictions later this month, James Bullard, the former president of the Federal Reserve Bank of St. Louis, indicated they should continue to factor in one more rate increase this year.

Economists have been raising their projections for gross domestic product as a result of a spate of data that have come in higher than anticipated in every category, from consumer spending to residential investment. The last time policymakers updated their own calculations was three months ago, and at that time, the general belief was that the economy would halt in the current quarter.