US stocks fall for third day as oil prices, Treasury yields surge

U.S. stock markets declined for a third consecutive trading session on Thursday as rising oil prices and bond market volatility pushed Treasury yields to their highest levels in nearly two decades. The S&P 500 slipped 0.5%, the Dow Jones Industrial Average fell 0.6%, and the Nasdaq Composite declined 0.7%, reflecting broad-based pressure across equities. The 10-year Treasury yield climbed to 5.20%, its highest level since 2007, up from 5.11% the previous day and sharply above 3.97% before geopolitical tensions with Iran elevated oil prices.

Elevated oil prices remain a key driver of market instability. Brent crude rose 4.1% to $102.20 per barrel, while U.S. benchmark West Texas Intermediate increased 3.2% to $95.10. These gains have rippled through the economy: gasoline prices reached $4.48 per gallon, up from under $4.10 a month earlier and $3.16 a year ago. Higher bond yields make borrowing more expensive for consumers managing inflation, businesses building artificial-intelligence data centers, and the U.S. government covering its fiscal gap. The yield surge also undermines stock valuations, particularly affecting costly growth stocks such as AI-related companies; Nvidia fell 1.5% as the heaviest weight on the S&P 500.

Economic data and Federal Reserve expectations have compounded market concerns. A preliminary report showed U.S. business activity expanding at its fastest pace in years while corporate costs rose sharply. New jobless claims fell, suggesting the economy remains resilient despite inflation pressures. These data points have led traders to price in a 71% likelihood of a Federal Reserve rate increase at its next meeting, up from 55% a week earlier, with some traders seeing better than even odds of two additional rate hikes by year-end. New York Federal Reserve President John Williams stated that another rate hike this year would be "reasonable." The Fed raised rates for the first time in three years last week, signaling its determination to combat inflation.

Despite headwinds, some corporate earnings beat expectations. Stitch Fix reported better-than-expected quarterly results but saw its stock plunge 24.6% after warning of a "more challenging consumer environment" affecting future revenue. Darden Restaurants matched profit expectations but fell 1.7%. Meta Platforms rose 4.5% after announcing new AI products, while Oracle dropped 3.5% after reporting it had invoked force majeure to limit expenses on a New Mexico data center project. MGM Resorts fell 11% after People Incorporated withdrew an acquisition proposal.

Market observers note that solid U.S. corporate profitability and strong consumer spending have so far supported equities despite geopolitical risks, inflation, and tariff concerns. However, higher Treasury yields and borrowing costs pose risks to AI infrastructure investment and broader economic growth. Asian markets were expected to face additional losses Friday as the selloff extended globally, driven by the same combination of elevated energy prices and tightening financial conditions.