Stocks fell on Thursday as Treasury yields kept marching higher, with traders anticipating further rate hikes from the Federal Reserve. A pullback in Oracle weighed on tech.
The Nasdaq Composite sank 0.78%, while the Dow Jones Industrial Average fell 191 points, or 0.37%. The S&P 500 was down 0.5%.
Oracle shares sank more than 5% after Bloomberg News reported, citing sources, that the company was citing force majeure in order to protect itself from a data center project being built in New Mexico if it is delayed.
The 30-year Treasury bond yield touched 5.446%, a level not seen since June 2004. The benchmark 10-year Treasury note yield, which is tied to rates on mortgages, surged to 5.15%, near levels not reached since July 2007. The 2-year note yield was flat on the day, but scaled to a 2023 high earlier in the week.
Those moves came as oil prices rose sharply. International Brent crude futures rose 1% to around $105 a barrel, while West Texas Intermediate crude gained 1% to around $93.
As yields surged, so did the market’s anticipation of further rate hikes from central bank policymakers. Fed funds futures trading suggests a greater than 70% likelihood that the policy-setting Federal Open Market Committee lifts its key rate once more in October, according to the CME FedWatch tool. That compares to a roughly 55% probability just a week ago.
Higher bond yields tend to squeeze consumers’ finances as they face higher borrowing costs at a time when they’re already paying more in fuel costs.
In a note Thursday, strategists at UBS Global Wealth Management said their base case was for energy disruption to remain relatively limited and an inflation shock insufficiently broad or persistent to derail economic growth.
“We continue to recommend positioning for further equity upside,” they said. “But the latest market movements showed that volatility is likely to continue, as investors remain concerned over a range of risks, including geopolitical developments, inflation, government debt, and the sustainability of AI capex. In our view, building portfolio resilience is equally important while staying invested.”
