Oil Prices and Bond Yields Keep Rising, Putting a Damper on Stocks

Dow Jones
09/29

The pressures of a punishing selloff in the bond market just won't let up.

Stocks slumped and yields touched multiyear highs Monday after President Trump rejected a proposal for a seven-day ceasefire with Iran and the oil market flashed a warning sign that fuel supplies are running low. The yield on the benchmark 10-year U.S. Treasury note reached a fresh 19-year high, and nearly touched levels not seen since 2002.

Major U.S. equity indexes advanced on Friday, partly on hopes that U.S. and Iranian negotiators were working on a deal to reopen the Strait of Hormuz. But a lack of progress over the weekend reignited fears of higher-for-longer fuel costs that could lift prices across the economy and spur further interest-rate hikes from the Federal Reserve.

The result was a choppy start to the trading week. The Nasdaq composite dropped 0.9%, retracing some earlier losses. The S&P 500 had its worst day in more than a month, falling 0.8%. The Dow Jones Industrial Average retreated 0.7%, or about 347 points.

"It's more of the same: higher yields and higher oil prices put pressure on equities," said Joseph Zappia, managing partner and co-chief investment officer at LVW Advisors.

A deepening bond rout has driven yields to historic heights in recent weeks, powered by rising prices and a fast-growing economy that shows few signs of cooling off. Monday's rise sent several fixed-income exchange-traded funds-including the iShares 10-20 Year Treasury Bond ETF and the Vanguard Short-Term Tax Exempt Bond ETF-to their first record closing lows since October 2023.

Meanwhile, oil prices are still hovering near triple digits. In Monday trading, the price for contracts that will deliver Brent crude oil in November climbed well ahead of those that will deliver in December. The gap was the largest since fighting raged in April, signaling the market is tight and buyers are vying to lock in supplies.

The price of November deliveries for Brent crude, the international benchmark, rose 0.9% to $105.28 a barrel.

"Unfortunately we are in a one factor world right now, with oil prices impacting rates and rates being the main driver of all asset classes," Mohit Kumar, chief European economist at Jefferies, wrote in a morning note.

The market's largest U.S. company was also among its few bright spots on Monday: Shares of Nvidia advanced 1.7% after the artificial-intelligence giant said its board had approved a $150 billion increase to its share-repurchase program, making it the largest-ever U.S. stock buyback. Investors' optimism failed to extend to other tech stocks: Every other member of the Magnificent Seven ended the day in the red.

Shares of the document database company MongoDB tumbled 18% after the company's CEO was hired to lead Meta's new business focused on selling artificial-intelligence tools to enterprise customers.

Stocks have held up remarkably well given the trouble in the bond market this month, said Bret Kenwell. U.S. investment analyst at eToro. The question, as markets stretch into the fourth and final quarter of 2026, is just how long that relative resilience can last.

"So far, the market has done a great job sailing into the headwinds and brushing them off," Kenwell said.

 

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