Highlights
Another day of surging oil prices and rising bond yields undercut stocks and other risk assets including crypto on Thursday. The Dow Jones industrial average, the S&P 500, and the Nasdaq were all off 0.6 percent. The dollar index was up slightly.
WTI oil futures prices jumped another 7 percent to move above $100 a barrel. That followed Brent crude's break of $100 on Wednesday. The latest move followed reports that the Houthis, Iran’s allies, were moving to gain more control over the flow of shipping through the Red Sea, the latest wrinkle in a widening US-Iran conflict. This is on top of new stepped-up strikes and counterstrikes by the US and Iran, with Iran showing new boldness in aiming for US assets, and renewed ballistic missile capabilities.
This was the eighth straight day of the oil rally. Bond yields tacked on more gains, largely in response to the oil price rally, with yields rising more sharply at the short end as the rising oil price and latest US producer price figures added to expectations that the Federal Reserve would join the ECB in raising benchmark interest rates next week. The bond market also reacted poorly to President Trump’s call on Wednesday for a payout of $5000 per US adult if the Republicans hold onto both Houses of Congress in midterm elections.
Among sectors, the AI momentum trade, featuring chipmakers, fared badly on rising interest rates. Other laggards included homebuilders industrial commodities, retailers, machinery, and engineering & construction stocks. Best were consumer staples, parcels & logistics, road & rail, and entertainment & media.