The 30-year Treasury yield rose as much as 0.14 percentage points to 5.23% after the Federal Reserve left its main rate unchanged for a fifth straight meeting, the highest level since 2007. The S&P 500 closed 1.5% lower and the Nasdaq 100 fell 2.1% as long-term borrowing costs climbed. Three FOMC members dissented, arguing rates should be raised immediately.
US borrowing costs hit the highest level since 2007 after the Federal Reserve held rates steady on Wednesday. The 30-year Treasury yield rose as much as 0.14 percentage points to 5.23%, its biggest jump since the April 2025 tariff announcement, signalling worries among investors that surging oil prices triggered by the Middle East conflict could prompt a lasting bout of inflation. The yield stayed elevated on Thursday morning at about 5.22%.
Equities sold off as the long end repriced
Stocks fell as those borrowing costs rose, leaving the broad S&P 500 down 1.5%. The Nasdaq 100, which is full of tech stocks that are vulnerable to rises in bond yields, fell 2.1%. The index also retreated into a correction, defined as a 10% loss or more from a recent high.
Chipmaking stocks saw yet another downturn, carrying on a trend this week. The Philadelphia Semiconductor Index declined by 5.33%. It has now fallen by more than 14% over the past five sessions.
Three policymakers wanted a hike immediately
The decision drew dissents from the Dallas Fed's Lorie Logan, Cleveland's Beth Hammack and Minneapolis's Neel Kashkari, who argued that borrowing costs should be raised immediately. Markets had predicted a roughly one-in-three chance that the Fed would raise rates on Wednesday.
Fed chief Kevin Warsh argued that a rise in bond yields between the June and July Fed meetings had essentially tightened monetary policy. According to the Financial Times, he insisted "this Fed will not waver" in the battle to cool US price growth. Inflation registered 4.1% in May, against a 2% goal the central bank has failed to hit for more than five years.
But the front end moved the other way. The two-year Treasury yield fell sharply on Wednesday as longer-dated yields rose, then drifted to around 4.28% on Thursday morning, down from about 4.34% before the Fed decision.
Microsoft and Meta split after the close
Microsoft shares gained more than 7% in extended hours trading after the company reported growth in its cloud business. Meta Platforms went the other way, sinking by over 7% after-hours as traders focused on an updated outlook guiding for capex of at least $130 billion this year.
Apple and Amazon report on Thursday. Futures pointed slightly higher before that, with S&P 500 futures up 15 points, or 0.2%.
Sources: Financial Times, Investing.com
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