U. S. stocks took a hit on Thursday. Investors were wrestling with the dual pressure of rising Treasury yields and escalating oil prices. The S&P 500 slipped 0.3%, while the Nasdaq Composite shed 0.5%. The Dow Jones Industrial Average hovered just below the flatline, reflecting a day of cautious trading.
The yield on the benchmark 10-year Treasury note nudged up by more than 1 basis point, hitting 5.288%. The 2-year Treasury yield climbed over 3 basis points to 4.798%. These movements came in the wake of comments from Federal Reserve Governor Christopher Waller. He suggested that further interest rate hikes might be necessary to keep inflation in check, adding to the market's unease.
Oil prices spiked after reports of the U. S. gearing up for significant military action in the Middle East fueled the surge. Brent crude jumped 4% to around $104 per barrel, while West Texas Intermediate futures also rose 4%, reaching about $92.
Key market sectors sensitive to borrowing costs were under pressure. Shares of Intel and Marvell Technology each fell more than 2%. Meanwhile, Bank of America and Citigroup saw their shares decline by roughly 1%, as rising yields weighed on financial and tech stocks.
Despite the volatility, some investors are still hopeful about the stock market's prospects. The upcoming earnings season is expected to provide a boost. The S&P 500 is anticipated to report a blended earnings growth rate of above 25% for the third quarter.
Amidst the broader market downturn, Palantir Technologies saw its shares climb 4%. This followed an upgrade from Goldman Sachs, which highlighted potential growth in the total addressable market, driven by a shift towards sovereign AI and customized applications.
Initial unemployment claims in the U. S. showed a slight decrease last week. First-time filings totaled a seasonally adjusted 197,000 for the week ending October 3, down 2,000 from the previous period. However, continuing claims rose by 17,000, reaching 1.72 million.
Goldman Sachs upgraded Palantir to a buy rating, anticipating more government contracts and efficiency gains for the company.
Federal Reserve Governor Waller, speaking in Turkey, reiterated the possibility of additional rate hikes if economic data aligns with expectations. He stressed the importance of forward guidance as a tool for signaling the Fed's rate-setting intentions.
In the Asia-Pacific region, markets closed lower on Thursday. Japan's Nikkei 225 fell 1.42%, and South Korea's Kospi dropped 2.62%. Australia's S&P/ASX 200 declined 0.77%, while Hong Kong's Hang Seng index was down 1.43% in late trading.
Meanwhile, Emmanuel Moulin, Governor of the Bank of France, pointed out the impact of energy prices on European inflation. He noted a strong correlation with U. S. interest rates. Despite the rising yields on French government debt, Moulin does not foresee any second-round effects.
European stock markets also started lower on Thursday. The pan-European Stoxx 600 fell 1.07% shortly after trading began in London. The U. K.'s FTSE 100, France's CAC 40, and Germany's DAX all recorded declines, reflecting a day of widespread market caution.
