Dow falls 160 points as Treasury Yields and oil prices rise

• The 30-year Treasury yield reached 5.491% (highest since June 2004) and the 10-year yield surged to 5.21%, driven by strong economic data and rising Fed rate hike expectations (71% probability for October, up from 55% a week earlier)
• Oil prices jumped sharply with Brent crude gaining over 4% to close above $107/barrel and WTI rising 3% to around $95, as Houthi missile attacks on Saudi Arabia revived Strait of Hormuz supply disruption concerns
• The S&P 500 traded at just under 19 times expected earnings, its lowest valuation since 2023, while AI stocks showed mixed performance with Oracle falling on force majeure news and others like Microsoft and Broadcom declining

Market Summary: Dow Falls on Rising Yields and Oil Prices

Market Performance:

U.S. stocks closed lower Thursday, with the Dow Jones Industrial Average declining 162.41 points (-0.32%) to 51,349.18, marking its third consecutive session loss. The S&P 500 slipped 0.03%, while the Nasdaq Composite edged up 0.01%.

Treasury Yields Hit Multi-Decade Highs:

Treasury yields surged dramatically, with the 30-year yield touching 5.491%—the highest since June 2004—and the 10-year yield reaching 5.21%, approaching July 2007 levels. This rise reflects growing expectations of further Federal Reserve rate hikes, with Fed funds futures indicating a 71% probability of an October hike, up from 55% the previous week. New York Fed President John Williams confirmed another rate increase remains a "reasonable possibility."

Oil Market Developments:

Crude prices jumped on renewed supply concerns following a Houthi missile attack on Saudi Arabia. Brent crude gained over 4% to close above $107 per barrel, while WTI crude rose 3% to approximately $95. Gains moderated after reports emerged of potential U.S.-Iran negotiations regarding a phased agreement that could reopen the Strait of Hormuz.

Corporate Highlights:

AI-related stocks showed mixed performance. Microsoft and Broadcom declined, while Oracle suffered significant losses following a force majeure notice related to a New Mexico data center project. MGM Resorts dropped after Barry Diller's People Inc withdrew its acquisition proposal.

Market Valuation:

The S&P 500 traded at just under 19x expected earnings, marking its lowest valuation since 2023, with AI companies driving much of the recent earnings expectation growth.

Higher yields increase borrowing costs and make bonds more attractive relative to equities, creating headwinds for stocks amid persistent inflation concerns.