Dow drops 160 points as Treasury yields and oil climb

• Treasury yields surged to multidecade highs: 10-year yield reached 5.21% (highest since July 2007) and 30-year yield hit 5.491% (highest since June 2004)
• Fed funds futures now show 71% probability of an October rate hike, up from 55% a week earlier, following stronger US business activity data
• Oil prices jumped sharply with Brent crude rising over 4% to above $107/barrel and WTI up 3% to around $95 amid Houthi attacks and Strait of Hormuz supply disruption concerns

Market Summary: Treasury Yields and Oil Pressure Equities

Market Performance:

U.S. equities closed lower Thursday, with the Dow Jones Industrial Average falling 162.41 points (-0.32%) to 51,349.18, marking its third consecutive decline. The S&P 500 dipped 0.03%, while the Nasdaq Composite edged up 0.01%. Markets recovered from session lows following reports of potential U.S.-Iran negotiations regarding the Strait of Hormuz.

Treasury Yields Surge:

Bond yields reached multidecade highs, with the 30-year Treasury touching 5.491% (highest since June 2004) and the 10-year climbing to 5.21% (near July 2007 levels). Higher yields increase borrowing costs and make bonds more attractive relative to equities, weighing on stock sentiment.

Federal Reserve Outlook:

Fed funds futures now price in a 71% probability of an October rate hike, up from 55% a week earlier. This follows strong business activity data and comments from New York Fed President John Williams suggesting another rate increase is a "reasonable possibility" before year-end.

Oil Market Rally:

Crude prices surged on supply disruption concerns after a Houthi missile attack on Saudi Arabia. Brent crude gained over 4% to above $107/barrel, while WTI rose 3% to around $95, adding to inflation pressures.

Individual Movers:

Oracle declined sharply after issuing a force majeure notice on a New Mexico data center project. MGM Resorts fell following withdrawal of a takeover proposal from Barry Diller's People Inc. AI stocks were mixed, with Microsoft and Broadcom down.

Valuation:

The S&P 500 traded at under 19x forward earnings, its lowest valuation since 2023, according to LSEG data.