Stocks Fall as Inflation Jitters Boost Bond Yields: Markets Wrap
(Bloomberg) — Stocks joined bonds lower as a rally in oil prices stoked worries about inflationary pressures, which were further reinforced by data showing jump in US business activity at the fastest pace since 2021.
The decline in equities sent the S&P 500 down from near-record levels. Brent crude settled around $103, fueling bets the Federal Reserve will keep boosting interest rates. A selloff in Treasuries deepened after a weak $70 billion sale of five-year notes that drove yields on most maturities to almost two-decade highs. The dollar climbed against all major currencies.
Both manufacturing and services saw a pickup in new orders and output this month, raising concern that activity has moved from resilient to overheating. An economy strong enough to survive hikes is different than one that is so strong, it’s adding to price pressures, according to Will Compernolle at FHN Financial.
“The former gives the Fed permission to focus on inflation without significant worry of labor-market deterioration,” he said. “The latter necessitates a more aggressive and urgent approach to tightening.”
The central bank last week raised rates to tame stubborn price pressures. Fed Governor Michael Barr said Wednesday that further tightening is likely needed to return inflation to the target. Money markets fully reflect three hikes over the next year, with significant hedging for a fourth increase.
Read: Hassett Blasts Fed Officials Calling for Hikes in Recent Days
“This is the market telling us we’ve entered a genuine re-tightening cycle,” said Tony Miano at Wells Fargo Investment Institute. “The entire curve is repricing at once, which means higher discount rates for equities, higher mortgage and corporate borrowing costs, and a higher bar for risk assets.”
The Treasury said it will purchase up to $6 billion of longer-dated government debt on Thursday, in line with the first such operation under Secretary Scott Bessent’s expanded program to stem the recent rise in borrowing costs.
Traders also monitored the latest geopolitical developments. Iran President Masoud Pezeshkian said his country won’t allow freedom of navigation through the Strait of Hormuz while sanctions and a US blockade remain in place, underscoring the difficulty in reaching a peace deal despite efforts to revive talks.
The Trump administration is working with refiners to voluntarily curb their exports of US diesel as an alternative to an outright ban on sending the fuel abroad, Energy Secretary Chris Wright said Wednesday.
Wall Street is also gearing up for a summit between President Donald Trump and his Chinese counterpart Xi Jinping in Washington, with talks set for Thursday and a dinner that will bring together a robust gathering of US corporate leaders. Trump told reporters last week that he expected to notch “a lot of different deals” during the event.
Corporate Highlights:
Derivatives tied to Nvidia Corp. are now among the most traded in the US credit default swaps market, as investors seek to hedge their exposure to the firm’s debt in the wake of June’s $25 billion bond sale. Microsoft Corp. was upgraded to buy from hold at Stifel, in what represents a vote of confidence from one of the few Wall Street’s firms that were cautious on the stock after its lagging run this year. Walt Disney Co. is raising prices on several of its streaming subscriptions in the US for the sixth time in as many years, in a move designed to boost earnings at a division that’s crucial to the company’s future. McDonald’s Corp. is earmarking roughly $8.5 billion to help franchisees implement a multiyear plan to serve better food, improve service and make restaurants easier to run. General Mills Inc. executives are leaning into new products higher in protein and fiber as the company works to restore sales growth after a wave of earlier price cuts. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.8% as of 4 p.m. New York time The Nasdaq 100 fell 0.9% The Dow Jones Industrial Average fell 0.7% The MSCI World Index fell 0.8% Currencies
The Bloomberg Dollar Spot Index rose 0.6% The euro fell 0.6% to $1.1386 The British pound fell 0.8% to $1.3243 The Japanese yen fell 0.6% to 158.32 per dollar Cryptocurrencies
Bitcoin fell 2.2% to $84,342.26 Ether fell 2.8% to $2,674.3 Bonds
The yield on 10-year Treasuries advanced 14 basis points to 5.10% Germany’s 10-year yield advanced nine basis points to 3.56% Britain’s 10-year yield advanced 11 basis points to 5.35% Commodities
West Texas Intermediate crude rose 2.4% to $92.68 a barrel Spot gold fell 1.7% to $4,285.81 an ounce ©2026 Bloomberg L.P.
