Oil Above $100 and 5% Treasury Yields Pressure Wall Street, Sending Stocks Lower

Wall Street stocks closed broadly lower as surging crude prices and rising U.S. Treasury yields rattled investors. Selling centered on technology shares, including semiconductors, as fears of renewed inflation and the possibility of further Federal Reserve tightening gained traction.

On Sept. 10, the Dow Jones Industrial Average fell 0.60% to close at 52,064.10 on the New York Stock Exchange. The S&P 500 dropped 0.58% to 7,591.70, while the Nasdaq Composite lost 0.65% to 26,081.72.

The biggest drag on equities came from oil. As the war between the U.S. and Iran dragged on, Yemen's Iran-backed Houthi rebels seized Mokha, a key city on the Red Sea coast, reviving concerns over disruptions to crude shipments. On the New York Mercantile Exchange, October West Texas Intermediate crude jumped 6.69% to $102.48 a barrel. November Brent crude also rose 6.34% to settle at $107.63. Both benchmarks reached their highest levels since May 19.

Treasury yields also climbed sharply. The 10-year yield rose above 4.95% intraday, its highest level since October 2023. The 30-year yield climbed as high as 5.360%, marking its highest close since June 2004, while the policy-sensitive two-year yield rose to 4.548%. Sentiment in the bond market weakened after the U.S. Treasury's proposed buyback size fell short of market expectations and actual purchases also came in below the maximum limit.

Inflation data added to the pressure from higher rates. The U.S. producer price index for August rose 0.4% from the previous month, matching market expectations, but was up 5.4% from a year earlier, above the 5.3% forecast. With higher oil prices fueling concern that inflation could reaccelerate, the possibility of a rate increase at next week's Federal Open Market Committee meeting returned to the fore.

Bill Adams, chief economist for Fifth Third Commercial Bank in the U.S., said surging energy prices in September have increased the chances that the next FOMC meeting will tilt toward a rate hike.

Semiconductor shares, which are highly sensitive to elevated rates, fell sharply. The Philadelphia Semiconductor Index dropped 2.66%. Micron fell 4.9%, while SK Hynix American depositary receipts slid 5.2%. Intel lost 5.57% and Nvidia declined 2.26%.

Individual stocks moved on earnings. Oracle posted fiscal second-quarter revenue of $19.35 billion and adjusted earnings per share of $1.92, topping market expectations, and rose about 7% in after-hours trading. Apple also gained more than 3% in regular trading after favorable reviews followed the unveiling of its first foldable iPhone.