The S&P 500 slid for a fourth straight session Thursday as the 10-year Treasury yield surged toward the 5% level that has historically rattled stocks. A hotter-than-expected producer-inflation report lifted the odds of a Federal Reserve rate hike, while rising oil prices added to the pressure.
Wall Street's benchmark index lost 55.02 points, or 0.72%, to 7,581.17 at 9:59 a.m. ET Thursday, with the Dow Jones Industrial Average and Nasdaq Composite also lower. The retreat came as bond yields climbed toward territory that has previously coincided with stock-market weakness.
Yields close in on the danger zone
The benchmark 10-year Treasury yield shot up seven basis points to 4.91%, putting it within reach of the 5% threshold. According to MarketWatch, Tom di Galoma, a managing director at Mischler Financial Group, said: "If we take out this 4.95% level, I think we are going to 5%." Higher yields raise the cost of capital, a concern for the technology and semiconductor companies that have driven much of the market's gains over the past four years, as the AI build-out leans heavily on borrowing.
Hotter inflation data lifts rate-hike odds
Producer prices rose 5.4% in August on an annualized basis, a touch above the 5.3% economists polled by Reuters had expected. Traders now see a 69.8% chance the Federal Reserve raises rates by at least 25 basis points next week, up from about 64% before the report, according to the CME FedWatch tool cited by Reuters. Two-year Treasury yields, which move with rate expectations, jumped to 4.516%, their highest since 2024.
Oil and Treasury buybacks add to the strain
Brent crude rose close to $105 a barrel Thursday, with di Galoma pointing to rising inflation as the driver. Treasury Secretary Scott Bessent's plan to buy up to $6 billion in longer-dated bonds underwhelmed bond traders Wednesday, with the first buyback operation due Thursday alongside a 30-year Treasury auction.
Sources: MarketWatch, Investing.com
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