The S&P 500 fell Thursday as climbing Treasury yields and a spike in oil prices pressured stocks, even after the index notched fresh all-time highs earlier in the week. Fed Governor Christopher Waller said additional rate hikes may still be needed, while banks and chipmakers led the declines.
The S&P 500 dropped 0.2% on Thursday as oil prices and Treasury yields weighed on sentiment. The Nasdaq Composite fell 0.5%. The Dow Jones Industrial Average shed 72 points, or 0.1%.
Oil Spikes, Then Pulls Back Off Its Highs
Brent crude rose 3% to around $103 a barrel. West Texas Intermediate futures advanced 3% to around $90. President Donald Trump said he doesn't want a deal with Iran, with the U.S. reportedly preparing for a large-scale military response. But oil came off its highs after he later said the U.S. won't attack Iran before the midterm elections on Nov. 3.
Separately, Reuters reported oil jumped more than 5% following an increase in attacks on shipping in the Gulf. Brent futures rose back above $105 a barrel in their biggest jump in a month. U.S. crude futures added 5.18% to $92.85 a barrel.
Waller Signals More Hikes, Yields Climb
Federal Reserve Governor Christopher Waller said Thursday he expects the central bank will need additional hikes to return inflation to its 2% goal. The 10-year Treasury yield was little changed at 5.273%. The 2-year Treasury yield gained more than 2 basis points to 4.791%.
Baird investment strategist Ross Mayfield said "we are in the process of the market adjusting to these new yields." Minutes from the Federal Reserve's latest meeting showed most policymakers considered another rate hike likely by year-end. Markets priced just a 21% chance of a move this month but nearly 80% odds of a December hike. The standoff keeps inflation and the prospect of another interest rate hike in focus for investors.
Rate-Sensitive Names Lag as Mega-Caps Hold Up
Banks and chipmakers sensitive to higher borrowing costs were under pressure again: Intel and Marvell Technology shares each fell more than 3%, while Bank of America and Citigroup shed 2% and 1%, respectively. One bright spot was Palantir Technologies, up 2% after Goldman Sachs upgraded the stock to buy.
Yet mega-cap tech has broadly cushioned the index: technology stocks make up 40% of the S&P 500. The Magnificent Seven group rallied 11% over the last three months. That has helped the S&P 500 and Nasdaq notch fresh all-time highs this week, even as the Dow Jones trades more than 6% below its early August record.
Sources: US Top News and Analysis, US Top News and Analysis, Economy News
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