Wall Street retreats as oil and yields climb
Major US stock indexes pulled further back from record highs on Thursday, with losses building for a second consecutive session after fresh peaks were set on Tuesday. Early premarket declines eased somewhat once trading began, though the Dow had earlier pointed to a drop of more than 500 points. Around 10:15 a.m. ET, the S&P 500 stood at 7,787.30, down 0.2%, the Dow Jones Industrial Average was at 51,209.22, up 0.05% or 29.35 points, and the Nasdaq 100 was at 31,024.28, down 0.44%.[S1]
In the opening hours of Thursday's session, the usual suspects — crude oil and government bond yields — were dragging on stock prices. Brent futures climbed 5% to reach $105 a barrel, driven by worries that Iran could face fresh, wide-ranging strikes within weeks. According to reports, Donald Trump and his team have been preparing options for significant military action before November's midterm elections. At a Wednesday rally, Trump remarked that reaching a deal is not something he truly desires.[S1]
Treasury yields resume their march higher
A fresh wave of Treasury selling pushed yields upward once more. The 10-year note's yield added roughly 1 basis point to stand at 5.29%, retreating after having climbed as much as 7 basis points to a level last seen in 2002. Remarks from a senior Federal Reserve official triggered the latest jump. Fed Governor Christopher Waller, speaking at an event in Turkey, indicated that additional rate increases will probably be necessary to bring inflation down. Minutes from the September meeting, released Wednesday, showed officials anticipate one more hike before the year ends.[S1]
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This latest surge arrives as investors keep a wary eye on turmoil in France's bond market, which many see as a cautionary signal for other countries grappling with fiscal strains. Jim Reid, who leads global macro research at Deutsche Bank, pointed to the worldwide scope of the bond market's wild ride and the strain it places on other assets. He noted that the UK 10-year gilt yield rose 6.8 basis points to a post-2007 peak of 5.44%, while Italian 10-year yields gained 9.7 basis points. US Treasuries largely steadied thanks to softer oil and a solid 10-year auction, yet 30-year yields still edged up 1.3 basis points to a new post-2002 high of 5.67% and have since added another 2.7 basis points. The renewed tension weighed heavily on riskier assets.[S1]
Debt supply and AI spending add to the strain
David Morrison, chief market strategist at Trade Nation, suggested additional forces may be pressuring US markets. A development from Silicon Valley could be intensifying worries about an excess of new debt supply just as appetite for Treasurys looks shaky. Bloomberg reported Tuesday that SpaceX aims to raise as much as $40 billion in debt to purchase Nvidia chips for its data centers. Morrison observed that Treasury yields jumped again, with the US 10-year and 30-year both near the 24-year highs touched a week earlier. Rising crude prices have added to the strain, as has word that SpaceX, Oracle and Broadcom are each seeking cash for AI chip acquisitions.[S1]
