US stocks closed broadly lower, extending losses for a third consecutive day, with the S&P 500 falling 0.7% to 7,631.47, the Dow Jones Industrial Average dropping 0.8% to 52,766.88, and the Nasdaq composite sliding 1% to 26,099.77. Technology stocks, including Nvidia (down 1.5%), Amazon (down 1.9%), and Advanced Micro Devices (down 2.4%), were particularly affected due to their reliance on borrowing, which becomes more expensive with rising interest rates. This downturn was largely attributed to a bond market sell-off and surging oil prices.
The bond market experienced a significant sell-off, with the yield on the 10-year Treasury rising to 4.79% from 4.75% the previous day, its highest since January 2025. The 30-year US Treasury bond yield reached just under 5.3%, a level not seen since 2007. Rising bond yields signal increased borrowing costs for mortgages, auto loans, and other credit, which tends to dampen investments and make business expansion more difficult. This global bond sell-off is driven by fears of persistently high inflation, increasing government debt (which recently surpassed $40 trillion), and investor demand for higher returns on government bonds.
Oil prices surged following new US military strikes on Iran and the effective closure of the Strait of Hormuz, a critical oil shipping route. Brent crude, the international standard, rose 4.6% to settle at $94.65 per barrel, while US oil climbed 5.2% to settle at $90.22 per barrel, closing above $90 for the first time in over a month. These higher energy costs are exacerbating inflation, which is currently well above 3%. Investors are now anticipating a rate hike by the Federal Reserve, with the CME FedWatch tool indicating a 66% chance of a benchmark interest rate increase at the upcoming September meeting, up from 39.6% a week prior.
