The Nasdaq Composite sank 0.8% on Thursday as Oracle shares dropped more than 5% on a force majeure report and Treasury yields kept climbing. The Dow fell 182 points and the S&P 500 lost 0.5%, with traders now pricing higher odds of another Fed rate hike in October.
The Nasdaq Composite sank 0.8% on Thursday, while the Dow Jones Industrial Average fell 182 points, or 0.4%, and the S&P 500 was down 0.5%. Rising Treasury yields pressured the broader market, but a pullback in Oracle weighed most heavily on tech names.
Oracle drags tech lower
Oracle shares sank more than 5% after Bloomberg News reported, citing sources, that the company was citing force majeure to protect itself from a data center project being built in New Mexico if it is delayed.
Yields climb to multi-decade highs
The 30-year Treasury bond yield touched 5.446%, a level not seen since June 2004. The benchmark 10-year Treasury note yield surged to 5.15%, near levels not reached since July 2007, while the two-year note yield was flat on the day after scaling a 2023 high earlier in the week. Those moves came as Brent crude futures rose 1% to around $105 a barrel, while West Texas Intermediate crude gained 1% to around $93.
As yields surged, so did the market's anticipation of further rate hikes. Fed funds futures trading suggests a greater than 70% likelihood that the Federal Open Market Committee lifts its key rate once more in October, according to the CME FedWatch tool — up from a roughly 55% probability just a week ago. Higher bond yields tend to squeeze consumers' finances as they face higher borrowing costs at a time when they're already paying more in fuel costs.
Strategists flag volatility ahead
Strategists at UBS Global Wealth Management said their base case remains for energy disruption to stay relatively limited. According to UBS: "We continue to recommend positioning for further equity upside." They added that volatility is likely to continue as investors weigh geopolitical developments, inflation, government debt and the sustainability of AI capex.
Readings from S&P Global's manufacturing and services purchasing managers' indexes suggested U.S. businesses are continuing to boom. But BMO Capital Markets noted severe supply chain bottlenecks, as well as higher fuel and transport prices, can drive inflation even as the PMI results came in strong.
Source: US Top News and Analysis
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