Key facts
- Stocks declined for a second day as oil prices surged and bond yields reached 24-year highs.
- Brent crude prices rose 5% to $105 per barrel amid concerns over potential attacks on Iran.
- The 10-year US Treasury yield increased 5 basis points to 5.33%.
- Fed Governor Christopher Waller indicated that more interest rate hikes may be necessary to curb inflation.
- SpaceX, Oracle, and Broadcom are reportedly seeking significant debt financing for AI chip purchases.
US stocks continued their decline on Thursday, with futures indicating a lower open for major indices, as investors grappled with surging oil prices and rising Treasury yields that approached 24-year highs. Brent crude prices jumped 5% to $105 per barrel amid concerns over potential large-scale attacks on Iran in the coming weeks, coupled with statements from Donald Trump suggesting a reluctance to pursue a deal.
Renewed selling in Treasurys pushed yields higher. The 10-year Treasury yield rose 5 basis points to 5.33%, reaching as high as 7 basis points before paring back. The 30-year yield hit a new post-2002 high of 5.67%. Comments from Federal Reserve Governor Christopher Waller, who stated that more rate hikes might be necessary to combat inflation, acted as a catalyst for the latest yield spike. This follows minutes from the Fed's September meeting, which indicated officials foresee one more rate increase this year.
Market observers are also watching France's bond market volatility as a potential warning for other economies facing fiscal instability. Jim Reid, global head of macro research at Deutsche Bank, highlighted the global nature of the bond market's fluctuations, noting that the UK's 10-year gilt yield reached a post-2007 high of 5.44% and Italian 10-year yields rose by 9.7 basis points. He added that US Treasuries showed some stabilization following a pullback in oil prices and a strong 10-year auction, but the 30-year yield still reached its highest level since 2002.
David Morrison, chief market strategist at Trade Nation, suggested that additional factors might be impacting US markets. Reports indicate that SpaceX is seeking up to $40 billion in debt financing to acquire Nvidia chips for its data centers. This, along with similar cash-raising efforts by Oracle and Broadcom for AI chip purchases, could be contributing to concerns about oversupply of new debt at a time of uncertain demand for Treasurys.