The S&P 500 was flat at 7,707.66 points mid-afternoon Thursday after Treasury yields hit multidecade highs and oil prices surged. The Dow Jones Industrial Average fell for a third straight session, while a media report of progress in U.S.-Iran talks helped stocks pare steeper losses.
The S&P 500 had dropped as much as 0.6% earlier in the session before paring the decline to trade flat. The Dow Jones Industrial Average slid 137 points, or 0.3%, marking its third consecutive down day, as Treasury yields at multidecade highs weighed on the market's most cyclical stocks.
Yields climb to multi-decade highs
The benchmark 10-year Treasury yield surged to 5.15%, near levels not reached since July 2007, according to CNBC. Investing.com separately reported the 10-year yield up 6.7 basis points to 5.183%, also the highest since July 2007. The 30-year Treasury bond yield touched 5.446%, a level not seen since June 2004.
According to Investing.com, King Lip, chief strategist and partner at BakerAvenue Wealth Management, said markets are wrestling with higher oil, higher bond yields and a more hawkish Fed, adding: "any one of those is manageable" on its own, but all three together may pressure equity valuations.
Oil rally adds to inflation pressure
Brent crude rose more than 3% to close above $106 per barrel, while U.S. West Texas Intermediate futures climbed nearly as much to settle at about $95 per barrel, CNBC reported. Investing.com put the move even higher, with Brent crude futures up 4.3% to $107.54 a barrel.
Stocks came off their session lows after Reuters, citing sources, reported that U.S. and Iranian negotiators in New York are considering a phased deal in which Iran would reopen the Strait of Hormuz and the U.S. would lift its economic blockade on Tehran.
Fed rate-hike odds climb
Fed funds futures now suggest a nearly 71% likelihood that the Federal Reserve raises its key rate again in October, per the CME FedWatch tool, CNBC reported, up from roughly 55% a week earlier. Investing.com's read on the same tool put the odds of a quarter-point October hike at nearly 69%, also up from about 55% a week ago.
Philadelphia Fed President Anna Paulson said Thursday that modest further tightening may be warranted to bring inflation back to target, a week after the Federal Open Market Committee raised benchmark borrowing rates by a quarter percentage point.
Sources: CNBC, Investing.com
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