US equities opened lower on Thursday, extending a three-day losing streak, as crude oil prices climbed above $100 a barrel and a hotter-than-expected producer price index (PPI) report fueled concerns that the Federal Reserve will deliver another interest rate hike next week.
The Dow Jones Industrial Average fell 153 points, while the S&P 500 slipped 0.56% and the Nasdaq Composite dropped 0.81%. The moves came as Treasury yields pushed to multi-year highs, adding pressure on stocks.
Oil surges past $100
West Texas Intermediate crude jumped more than 4.3% to trade above $100 a barrel, while Brent crude advanced past $105. The rally extends a surge driven by ongoing disruptions in the Strait of Hormuz and the Red Sea, as the US-Iran conflict enters its seventh month with no sign of resolution.
The prolonged tensions have heightened worries about global energy supply chains and the potential inflationary impact of higher fuel costs. Energy prices have been a key driver of recent inflation readings, and the latest move adds to concerns that the Fed may need to keep rates higher for longer.
Producer inflation keeps Fed in focus
The Labor Department reported that the Producer Price Index rose 0.4% in August from the prior month, matching economists' forecasts. On an annual basis, PPI increased 5.4%, slightly above the 5.3% expected by analysts polled by Reuters.
The data comes just ahead of Friday's Consumer Price Index (CPI) report, which investors will scrutinize for further clues on the Fed's policy path. Following the PPI release, fed funds futures priced in a 70% chance of a 25-basis-point hike at next week's Federal Open Market Committee meeting, up from about 64% before the report, according to the CME FedWatch Tool.
Two-year Treasury yields, which are particularly sensitive to monetary policy expectations, rose to 4.490%, their highest level since 2024. The benchmark 10-year yield climbed to 4.901%, its highest since 2023, despite the Treasury Department's plan to buy back up to $6 billion in longer-dated bonds. The buyback was intended to help manage long-term yields, but its immediate impact appears limited.
Tech and retail stocks under pressure
High-beta semiconductor stocks, which have been market leaders, also came under selling pressure. Intel shares fell 4.5%, while Micron Technology declined 3.6%. The weakness in tech echoes a broader tech selloff that began in early September, as investors reassess valuations in a higher-rate environment.
In retail, Macy's shares dropped 2.84% despite raising its annual forecasts after stronger performance at its Bloomingdale's and Bluemercury chains. American Eagle Outfitters tumbled 12.14% after maintaining its annual comparable-sales forecast and warning that current-quarter gross margins could remain flat year over year.
Apple shares edged 1.93% higher after launching its $1,999 folding Duo iPhone a day earlier. The product launch has drawn mixed reactions, but the stock has found some support.
Investors now await Friday's CPI report, which will be a key determinant for the Fed's decision. A higher-than-expected reading could solidify the case for a rate hike, while a softer number might ease some pressure on equities.
This article is for informational purposes only and does not constitute financial advice.
