U.S. equities closed sharply lower on Thursday, with the Dow Jones Industrial Average shedding more than 600 points as a renewed surge in Treasury yields rattled investor sentiment. The S&P 500 and Nasdaq Composite also finished in the red, extending a volatile week for markets.
Treasury yields resume upward march
The 10-year Treasury yield climbed about five basis points to 4.706%, while the 30-year yield added a similar amount to reach 5.251%. This uptick came just a day after the Treasury Department announced plans to expand its long-dated debt buyback program, initially targeting at least $4 billion in purchases of 10-, 20-, and 30-year bonds. That news had briefly soothed bond markets, but the relief proved short-lived as yields pushed higher again.
The renewed rise in borrowing costs reignited concerns that the Treasury's buyback efforts may not be sufficient to provide lasting support. Higher yields tend to pressure equities by making fixed-income investments more attractive relative to stocks and by increasing financing costs for corporations and consumers. The 30-year yield had earlier this week touched its highest level in nearly two decades, adding to the strain on rate-sensitive sectors.
Oil prices climb on geopolitical tensions
Oil futures extended their winning streak to a fifth session, with West Texas Intermediate crude for October delivery gaining about 2% to trade above $86 per barrel. Brent crude similarly rose roughly 2% to exceed $93. The advance was fueled by ongoing tensions between the United States and Iran, as diplomatic efforts to resolve the conflict showed little progress.
Rising energy costs added to inflation worries, particularly after recent data pointed to softer retail sales and a cooling labor market in July. While energy stocks benefited from the higher oil prices—the S&P 500 energy index was among the day's outperformers—companies with significant fuel exposure, such as cruise operators Royal Caribbean and Carnival, saw their shares decline. Elevated gasoline prices also raised questions about the resilience of U.S. consumer spending.
Walmart's weak outlook hits retail sector
Walmart shares tumbled about 9% after the retail giant reported weaker-than-expected U.S. comparable sales and issued a cautious third-quarter outlook. The decline marked the stock's worst daily performance in over four years and dragged down other consumer names, including Costco, Dollar Tree, and Albertsons.
Elsewhere, individual movers reflected company-specific news. Moderna gave back a portion of Wednesday's massive gains, when the biotech firm had surged nearly 177%. Deere rose after raising the lower end of its full-year net income forecast. Coty fell after projecting current-quarter earnings below expectations and withholding its annual outlook. Advance Auto Parts also declined following a weaker annual sales forecast.
In the cryptocurrency space, shares of Strategy and Coinbase advanced after President Donald Trump urged Congress to move forward on crypto legislation. This development added a positive note to an otherwise downbeat session.
The market's reaction to rising yields and oil prices underscores the delicate balance investors are trying to strike between growth prospects and inflationary pressures. As the Treasury's buyback program unfolds, market participants will be watching closely to see if it can stabilize the bond market and provide some relief to equities. For more on how the buyback plan is influencing long-duration assets, see our earlier analysis on Treasury buyback effects on TLT-linked stocks.
Meanwhile, the ongoing climb in oil prices and its potential impact on consumer spending remains a key risk. Recent data on retail sales and employment have already hinted at a slowdown, and higher energy costs could exacerbate that trend. For a broader look at how yields are affecting growth sectors, check out our piece on AI infrastructure stocks under pressure from high yields.
As the week draws to a close, investors will be parsing these signals to gauge the Federal Reserve's next moves. The central bank has been walking a tightrope between taming inflation and supporting economic growth, and the latest market turbulence adds another layer of complexity. For a recap of the previous session's gains, see our report on how Treasury buybacks briefly eased yields.
This article is for informational purposes only and does not constitute financial advice.
