U.S. stocks closed lower Thursday as rising oil prices, firm producer inflation and sharply higher Treasury yields increased expectations that the Federal Reserve could raise interest rates next week.
By yourNEWS Media Newsroom.
U.S. stocks retreated Thursday as a surge in oil prices and fresh inflation data pushed Treasury yields higher and strengthened expectations that the Federal Reserve could raise interest rates at its policy meeting next week.
Preliminary closing data showed the S&P 500 falling 44.16 points, or 0.58%, to 7,592.20, while the Nasdaq Composite declined 167.15 points, or 0.64%, to 26,086.19. The Dow Jones Industrial Average dropped 313.64 points, or 0.60%, to 52,067.02.
Energy markets added to Wall Street’s concerns. Brent crude jumped 6% to $107 a barrel as supply routes through the Strait of Hormuz and Red Sea remained disrupted by the U.S.-Israeli war with Iran. The renewed increase in energy costs intensified worries that inflation could remain elevated and complicate the Federal Reserve’s interest-rate outlook.
Thursday’s producer price index showed U.S. wholesale prices rising in line with expectations in August on a monthly basis, driven in part by a rebound in energy costs. Investors are now awaiting Friday’s consumer price report for another indication of whether inflationary pressures are accelerating.
Expectations for tighter monetary policy increased following the PPI report. Traders assigned a 70% probability that the Federal Reserve will raise its benchmark interest rate by at least 25 basis points next week, up from about 64% before Thursday’s data, according to the CME FedWatch tool.
Treasury yields rose sharply across maturities as investors adjusted to the possibility of higher interest rates and continued concerns over inflation and federal debt.
The yield on the benchmark 10-year Treasury climbed to its highest level in nearly three years. The 30-year yield reached its highest level in more than 19 years, while the 2-year Treasury yield rose to its highest point in more than two years.
“Yields are going up at the short end of the curve because the Fed is probably going to hike in the next couple months. Yields are going up at the long end of the curve because of debt and deficit issues, and sticky inflation,” said Ross Mayfield, an investment strategy analyst at Baird in Louisville, Kentucky.
“Higher yields are a negative for the equity market. They lower valuations and they make it more expensive to operate a business, and more expensive for consumers to exist in the world.”
Higher Treasury yields can pressure stocks by increasing borrowing costs while making government securities more attractive relative to equities. Technology and other growth-oriented stocks can be particularly sensitive because higher rates reduce the present value investors place on expected future earnings.
Large semiconductor companies were among Thursday’s notable decliners. Nvidia and Micron Technology weighed on the S&P 500 as investors pulled back from some heavyweight technology names.
Apple moved in the opposite direction, rallying one day after unveiling a new $1,999 iPhone.
Thursday’s decline extended a recent pullback in U.S. equities. The S&P 500 is now nearly 3% below its record closing high reached Aug. 13, though the benchmark remains up approximately 11% for 2026.
The retreat in stock prices, combined with expectations for continued earnings growth, has brought the S&P 500’s valuation down to approximately 19 times projected earnings. That is its lowest valuation multiple since April 2025, when President Donald Trump’s “Liberation Day” tariff announcements triggered sharp volatility across global financial markets.
Individual retailers also came under pressure Thursday.
Macy’s shares declined even after the department-store company raised its annual forecasts, with the revised outlook failing to meet investors’ expectations.
American Eagle Outfitters also fell, dropping to its lowest level since October after the apparel retailer reiterated its full-year comparable-sales forecast amid uneven consumer discretionary spending.
The primary focus now turns to Friday’s consumer price index, which could further shape expectations ahead of the Federal Reserve’s Wednesday policy decision.
With crude oil above $100 a barrel, Treasury yields reaching multiyear highs and markets pricing in a greater likelihood of another rate increase, investors ended Thursday increasingly focused on whether persistent inflation will force the Fed to tighten monetary policy further despite growing pressure on financial markets.
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