Raging Conflict in the Middle East and Rising Yields Weigh on U.S. Stocks

Dow Jones
09/25
 
 

An uncertain outlook for peace in the Middle East pushed bond yields higher and weighed on stocks on Thursday, with investors weighing dissonant reports on attacks and negotiations.

U.S. Treasury yields touched highs unseen since the early 2000s, and oil prices hovered well above $100 a barrel.

Saudi Arabia said it intercepted ballistic missiles launched at the kingdom, a day after Iranian President Masoud Pezeshkian said Tehran will never give up its nuclear program. Meanwhile, talks between the U.S. and Iran focused on a phased deal to reopen the Strait of Hormuz. By late afternoon, there appeared few signs of progress. Oil futures rose, with European benchmark Brent gaining 3.4% to $106.60 a barrel.

The yield on the 10-year Treasury note climbed 0.050 percentage point to a high of 5.163%, a peak last reached in 2007. The yield on the 30-year bond rose 0.059 percentage point to 5.460%, its highest level in more than two decades. The yield on the two-year Treasury note edged 0.002 percentage point to 4.895%.

Higher yields often draw investors to bonds and make stocks less appealing.

On Thursday, the Dow Jones Industrial Average fell 0.3%, or 161.7 points. Other indexes ended little changed, with the S&P 500 down a fraction of a percent and Nasdaq Composite inching higher.

Shares of Oracle declined 3.5% after Bloomberg reported the company is attempting to put off payments if a New Mexico data-center project gets derailed or fails to come online in 2028 as planned.

Barry Diller on Wednesday said he is withdrawing his bid for MGM Resorts after months of discussions with the company. MGM fell 11%

Darden Restaurants said higher food and labor costs weighed on profit in the latest quarter, more than offsetting continued sales growth. The stock slid 3%.

Yields have continued their climb despite the Treasury Department's efforts to stem them by repurchasing the government's own bonds. Treasury bought back $4.08 billion in long-term debt, less than the $6 billion maximum.

Thursday's auction didn't help; the Treasury sold nearly $44 billion worth of seven-year notes at 5.085%, its highest yield in 33 years.

Investors are losing their appetite for risk as the odds of further rate hikes from the Fed this year increase. Philadelphia Fed President Anna Paulson said on Thursday that the central bank has yet to see data indicating that inflation is coming under control. "If conditions evolve as I expect, some modest further tightening may be warranted," Paulson said.

 
 

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