S&P 500 posts second weekly loss as 10-year Treasury yield hits 5%
The S&P 500 closed Friday with a 0.2% gain, capping a week that ended in its second consecutive loss. The mixed finish for U.S. stock indexes came as elevated bond yields and volatile oil prices weighed on market sentiment.
The Dow Jones Industrial Average slipped 0.2%, while the Nasdaq composite added 0.4%. The yield on the 10-year Treasury climbed to 5% from 4.94% late Thursday, marking the first time it topped that level since 2023. Rising yields make borrowing more expensive for governments, homeowners, and businesses, including those constructing AI data centers, which tends to undercut stock prices.
Yields have climbed steadily since the pandemic knocked them near zero in 2020, with the recent acceleration driven by stubbornly high inflation. Inflation remains well above 3% by several measures, worsened by higher oil prices linked to the war with Iran. Brent crude, the international standard, reached nearly $110 per barrel early this week, up from a little over $70 in July. The price briefly dropped below $102 in overnight trading before settling at $103.87, down 0.9% from the previous day.
Higher oil costs have pushed average gasoline prices to $4.47 per gallon, up from $3.20 a year ago, according to AAA. Diesel prices hit a record $6.45 per gallon, directly impacting shipping costs for goods ranging from groceries to clothing.
Steel maker Nucor reported late Thursday that it expects third-quarter profit from its steel mills business to rise due to higher pricing power, but it must absorb increased costs. Its overall third-quarter profit forecast fell short of analyst expectations, causing its stock to sink 6.3%.
Berkshire Hathaway edged up 0.1% after Warren Buffett announced he is stepping down as chairman. Buffett had previously relinquished his role as CEO, where he built a reputation for buying undervalued stocks with patience.
General Motors fell 5.1% and Qualcomm dropped 5.8%. Among gainers, Coinbase Global climbed 11.7% for the largest increase among S&P 500 stocks, and Robinhood Markets rose 9.1%. The S&P 500 finished at 7,650.50 after gaining 12.74 points. The Dow ended at 51,682.64, down 95.40 points, while the Nasdaq closed at 26,552.55 after adding 104.25 points.
European indexes slumped, with Paris' CAC 40 and London's FTSE 100 both falling 1.5%. Asian markets performed better, with South Korea's Kospi jumping 2.7% and Japan's Nikkei rising 1.4%. The Bank of Japan raised its benchmark rate to a 31-year high, following the Federal Reserve's earlier decision to raise its federal funds rate for the first time in three years.
Angelo Kourkafas, senior global strategist at Edward Jones, noted that resilient consumer spending and a solid labor market left the Fed with few reasons to stay on the sidelines after more than five years of above-target inflation. The Fed's move may keep pressure on Treasury yields, especially since officials suggested further hikes could be needed this year. However, it also reinforced confidence that the Fed will take necessary steps to return inflation to its 2% target, even if it causes short-term economic pain and upsets President Donald Trump, who has called for lower rates.
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