The 10-year Treasury yield hit 5.20% on Thursday, up from 5.11% the evening before and back to where it stood in 2007. Stocks spent the day reacting to it.
The S&P 500 swung between losses and gains several times, then ended almost where it began, down 1.90 points at 7,704.13. The Dow Jones Industrial Average fell 161.61 points, or 0.3%, to 51,349.98. The Nasdaq composite added 3.34 points to 26,939.37.
Yields chase oil
Yields climbed through the morning and pushed stocks down. Around midday the 10-year dropped from nearly 5.17% to under 5.13% in about 20 minutes before turning up again. Oil was the driver. Prices have been erratic because nobody knows when the war with Iran will let crude flow freely from the Middle East. Brent slid from $102 to roughly $99 within minutes, then settled at $100.22, up 2.1% on the day.
Oil is not the only force on yields. The economy keeps growing, and a report showed fewer Americans applied for unemployment benefits last week. That could persuade the Federal Reserve the economy can take more rate hikes. The Fed raised its main rate last week for the first time in three years, and CME Group data show traders see better than even odds of two more increases by year-end.
High yields slow the economy by making borrowing dearer, and they undercut prices for stocks and other investments. They tend to hit the priciest shares hardest, which puts AI stocks in the line of fire. Costlier borrowing could also slow construction of AI data centers and hold back demand for chips. Nvidia slipped 0.4% and was the heaviest weight on the S&P 500.
Winners and losers
Barclays strategists were calm about it. “The headlines have turned more ominous, but the underlying drivers of growth remain intact,” they wrote, adding that markets can absorb tighter central banks as long as AI investment, corporate profits and consumer spending keep beating expectations.
Company news pulled in both directions. Stitch Fix beat analysts’ quarterly forecasts but fell 21.6% after warning that “a more challenging consumer environment” could hold back revenue growth in the coming fiscal year. Darden Restaurants, the parent of Olive Garden and LongHorn Steakhouse, lost 3% after profit that only matched expectations. Everpure, a data storage company, jumped 11.2% after it stood by its forecasts and said it expects revenue growth to speed up the following year.
Abroad, indexes mostly dipped. Shanghai dropped 1.2% and Tokyo gained 0.8%.
