U.S. stocks fell the most since June and volatility spiked higher as the rout in Treasuries that took yields to multiyear highs fueled a repricing of risk assets.

The S&P 500 dropped to a three-week low, with nine of the 11 main sectors retreating. High-dividend-yielding stocks dropped after the 10-year yield poked above 3.2 per cent for the first time in seven years. Technology shares fell the most, with the Nasdaq 100 Index notching its worst day since June following Bloomberg’s report that China infiltrated American companies with hardware hacks. Higher rates lifted financial firms.

The bond rout rippled through global financial markets even as Treasuries stabilized Thursday. Emerging-market shares sank the most since February, European government bonds fell and commodities from crude to copper tumbled. The Turkish lira led developing-nation currencies lower, closely followed by Russia’s ruble.

“This withdrawal of liquidity and gradual tightening of monetary policy” is reverberating across financial markets, Bob Baur, chief global economist at Principal Global Investors, said in an interview with Bloomberg Television. “We look for 10-year Treasury yields to hit 3.5 at some point -- later this year, early next year -- and I think that’s going to be a real problem for stock markets.”

Data underscoring the strength of the American economy sparked the Treasury selloff, sending yields higher fast enough to spook equity investors who had pushed stocks toward records on the heels of the new NAFTA agreement. Fed Chairman Jerome Powell stoked rate worries when he said the central bank could eventually boost its benchmark past the neutral level.

Adding to the rising risk sentiment were growing signs of strain in U.S.-China relations that could exacerbate the trade war. Along with the hacking report, Vice President Mike Pence laid out allegations of Chinese election interference in a harshly worded speech, and Alibaba co-founder Jack Ma warned the tariff dispute will destroy commerce.

“It has to do with this story about the hacking,” Matt Maley, equity strategist, at Miller Tabak + Co, said. “This is going to raise the stress in the trade tensions with China. China is very important to a lot of these tech cos.”

The bond slump likely also reflects the growing impact of the world’s major central banks stepping back from stimulus. The ECB this month cut monthly asset purchases in half, while the Fed balance sheet unwind continues. Meanwhile, resurgent commodity prices are raising the prospect of a fresh tailwind to inflation.

In credit, borrowing costs have been advancing amid the Treasury slump. Global investment-grade corporate bond yields rose to the highest since July 2012, Bloomberg index data show. The instability may have affected Europe’s primary market as two borrowers pulled bond sales.

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Here are some key events coming up this week:

The U.S. government’s September jobs report is in focus Friday, with investors looking for signs of wage growth that could accelerate Fed tightening plans. The Reserve Bank of India’s policy decision is due Friday.

These are the main moves in markets:

Stocks

The S&P 500 Index fell 1 per cent as of 4 p.m. in New York. The Nasdaq 100 Index slid 2.1 per cent, the most since mid-June. Super Micro Computer sank almost 50 per cent after the Bloomberg’s report that China implanted tiny chips on motherboards supplied by the company. The Stoxx Europe 600 Index lost 1.1 per cent, the most since August. The MSCI Asia Pacific Index sank 1 per cent to the lowest in three weeks on the largest tumble in more than four weeks. The MSCI Emerging Market Index sank 2.5 per cent to the lowest in more than three weeks on the biggest tumble in more than six months.

Currencies

The Bloomberg Dollar Spot Index rose 0.1 per cent after hitting the highest in seven weeks with its sixth straight advance. The euro increased 0.3 per cent to US$1.1516, the first advance in more than a week and the biggest climb in two weeks. The Japanese yen jumped 0.6 per cent to 113.843 per dollar, the biggest increase in four weeks.

Bonds

The yield on 10-year Treasuries rose one basis point to 3.19 per cent, the highest in more than seven years. The two-year rate was flat at 2.878 per cent. Germany’s 10-year yield increased six basis points to 0.53 per cent, the highest in a week. The spread of Italy’s 10-year bonds over Germany’s decreased one basis point to 2.828 per centage points.

Commodities

West Texas Intermediate crude fell 2.5 per cent to US$74.55 a barrel, the largest fall in more than a week. Gold futures were flat at US$1,203.2 an ounce.