Treasury yields hit 19-year high as oil spikes

Brent crude prices surged 6% to $107 per barrel. This jump followed disruptions to supply routes through the Strait of Hormuz and the Red Sea. The spike in energy costs raised inflation concerns. The S&P 500 closed down 0.58% at 7,591.75 points. The Nasdaq fell 0.65% to 26,081.73 points. The Dow Jones Industrial Average dropped 0.60% to 52,064.10 points.

Traders now price a 70% probability of a Federal Reserve rate hike next week. This expectation rose from 64% before the release of August producer price data. The S&P 500 has lost 2% over the last four sessions. This is the deepest four-day decline since June. The index stands down nearly 3% from its record high on August 13.

Treasury yields reach multi-year peaks

Yields on 10-year Treasury notes rose to their highest level in nearly three years. 30-year Treasury yields hit their highest point in more than 19 years. 2-year Treasury yields reached their highest level in over two years. These rising yields made equity valuations less attractive. Higher borrowing costs also increased operational expenses for businesses.

Chipmakers lead broad market decline

Nvidia shares fell 2.3% while Micron Technology lost 4.7%. Both moves weighed heavily on the S&P 500. Apple shares rallied 3.6% following the launch of a new $1,999 iPhone. Materials stocks led sector losses with a 1.45% drop. Information technology stocks declined 0.91%. Nine of the eleven S&P 500 sector indexes closed lower.

Retail stocks face continued pressure

Macy’s shares dropped 4.7% despite raising annual forecasts. Investors found the guidance insufficient. American Eagle Outfitters fell 14% to its lowest level since October. The company reiterated its comparable sales forecast amid weak discretionary spending. Declining stocks outnumbered rising ones by a 2.0-to-1 ratio within the S&P 500. The Nasdaq recorded 215 new lows against 44 new highs.