Crude Oil Gains and Rising Yields Weigh on Mixed US Stocks
WTI crude oil prices rose by more than 1% today, driving the 10-year Treasury yield up to 4.99%. This inflationary pressure contributed to a mixed session for US equity markets.
The S&P 500 Index fell by 0.03% while the Dow Jones Industrial Average dropped 0.23%. The Nasdaq 100 Index rose by 0.20%, reaching a one-week high. Strength in semiconductor and AI infrastructure stocks supported the tech-heavy index. According to GN auto markets/energy: crude oil prices, rising energy costs are a primary headwind for broader market sentiment.
US economic data showed August manufacturing production declined by 0.3% month-over-month. This figure missed expectations of a 0.3% increase and marked the largest drop in ten months. The 10-year T-note yield increased by 5.6 basis points to 4.986%. Bond prices fell as higher crude oil prices boosted inflation expectations.
Middle East Tensions Drive Supply Concerns
October WTI crude contracts gained more than 1% amid ongoing geopolitical risks. Houthi militants have attacked energy facilities in Saudi Arabia and moved toward the Bab-el-Mandeb strait. These actions threaten key shipping routes for regional oil exports. Diplomatic efforts remain active to stabilize supply flows.
US Energy Secretary Chris Wright stated that 18 million barrels of oil passed through the Strait of Hormuz on Tuesday. Saudi Arabia aims to restore half the capacity of the East-West pipeline within days. The pipeline, which carries 7 million barrels per day, was shut down last week due to drone threats. Saudi crude production fell to 6.238 million barrels per day in August, the lowest level since 1990.
Global Markets and Derivatives Activity
European equities underperformed with the Euro Stoxx 50 down 1.26%. Asian markets showed strength as the Shanghai Composite rose 0.94% and the Nikkei-225 climbed 1.38%. Both indices closed at one-week highs. Market volatility was elevated due to triple witching, when equity options, futures, and derivatives expire simultaneously.
Citadel Securities reported that approximately $7 trillion in options expire today. This volume represents one of the largest settlements on record. The Federal Reserve market participants are pricing in a 58% probability of a 25 basis point rate hike. This expectation applies to the upcoming FOMC meeting scheduled for October 27-28.
