In the early hours of Friday Beijing time, the Dow Jones Industrial Average closed lower for a third consecutive session. Treasury yields sitting at multi-decade highs continued to weigh on the most cyclically sensitive sectors of the market.

The Dow fell 161.61 points, or 0.31%, to 51,349.98. The S&P 500 slipped 1.90 points, or 0.02%, to 7,704.13, while the Nasdaq gained 3.34 points, or 0.01%, to 26,939.37.

According to reports, U.S. and Iranian negotiators are discussing a phased agreement to end the conflict in the Middle East. Buoyed by that news, U.S. equities rebounded from their intraday lows. But oil prices and Treasury yields remained elevated.

International crude benchmark Brent rose more than 3%, closing above $106 a barrel, while U.S. WTI crude gained nearly as much as Brent, settling at about $95 a barrel.

The 30-year Treasury yield touched 5.446%, the highest since June 2004, while the 10-year benchmark yield, tied to mortgage rates, surged to 5.15%, approaching its July 2007 high. The 2-year yield was roughly flat on the day but earlier in the week had touched its highest level since 2023.

With yields climbing sharply, expectations for further central bank rate hikes have risen in tandem. The CME FedWatch Tool showed federal funds futures pricing in a nearly 71% probability of another Fed rate increase in October, up from only about 55% a week earlier.

Rising bond yields squeeze consumers financially, as households face both higher borrowing costs and growing fuel expenses. Still, S&P Global's manufacturing and services purchasing managers' index data showed U.S. business activity continues to expand strongly.

Jason Stephens, founder of Evertern Wealth, said: "The U.S. economy is showing tremendous resilience, but that strength also keeps inflation worries alive and pushes rates higher. Right now the bond market is the market most worth watching closely."

Stephens argued that the bigger risk is not whether the Fed hikes again, but how long high rates persist, and what a 10-year Treasury yield holding above 5% ultimately does to real estate, corporate borrowing, private markets and equity valuations. He also noted that energy is one of the biggest variables: every shift in the Middle East situation that sends oil prices swinging quickly feeds directly into the debate over inflation and rates.

He said the market is currently in a fascinating contradiction: "Investors are worried about rising rates not because the economy is collapsing, but precisely because the economic data are too strong."

Oracle was among the main decliners on Thursday. According to reports, Oracle invoked force majeure on its data center project under construction in New Mexico to shield itself from the risks of project delays, and its shares fell more than 3% after the news emerged.