The S&P 500 closed lower as the 10-year Treasury yield jumped to its highest level since October 2023 and oil moved back above $100 a barrel. Producer price data showed inflation still running above the Federal Reserve's target on a year-over-year basis, pushing bond yields up and weighing on stocks across the board.
The S&P 500 fell 44.59 points, or 0.58%, to 7,591.78 as rising borrowing costs and higher oil prices pressured equities. The 10-year Treasury yield climbed 11.8 basis points to 4.9545%, its highest yield since October 2023.
Rising yields and $100 oil pressure the indices
Other major indices closed lower alongside the S&P 500. The Dow Jones Industrial Average fell 317.03 points, or 0.61%, to 52,069.22. The Nasdaq Composite dropped 171.62 points, or 0.65%, to 26,081.72.
The Russell 2000 declined 30.28 points, or 1.04%, to 2,890.95. The Nasdaq 100 lost 318.04 points, or 1.08%, to 29,103.51.
Oil added to the pressure after moving above $100 per barrel for the first time since mid-May. Higher oil prices can lift headline inflation, squeeze corporate margins and make it harder for the Federal Reserve to lower interest rates.
Producer prices keep inflation concerns in place
US producer price data came in close to expectations on a month-over-month basis, but the year-over-year readings remained the bigger story. Producer inflation is still running well above the Fed's 2% target, showing that price pressures in the production pipeline have not gone away.
The report was close enough to expectations to avoid an immediate shock, but not soft enough to bring relief. Bond traders focused on the persistently high annual inflation rates, sending yields sharply higher across the curve. The 2-year yield rose 14.2 basis points to 4.5687%. The 5-year yield rose 13.6 basis points to 4.7492%. The 30-year yield rose 8.1 basis points to 5.3673%.
Higher yields raise the discount rate applied to future earnings, while oil above $100 adds to inflation and growth concerns. Buyers will need yields to settle down, and preferably move lower, to give stocks room to recover.
Source: Investinglive
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