S&P 500, Nasdaq snap 9-session winning streak

10-year Treasury yield briefly tops 4.5% during trading

Rate hike expectations grow for later this year

A broadcast featuring U.S. President Donald Trump plays at the New York Stock Exchange. [Getty Images]
A broadcast featuring U.S. President Donald Trump plays at the New York Stock Exchange. [Getty Images]

By Seo Ji-yeon, The Herald Business

U.S. stocks and bonds fell in tandem Wednesday as military tensions in the Middle East flared anew, with cease-fire negotiations between Washington and Tehran stalling. International oil prices edged back toward $100 a barrel, and U.S. Treasury yields pushed through key resistance levels.

The Dow Jones Industrial Average closed down 620.72 points, or 1.21 percent, at 50,687.07 on the New York Stock Exchange.

The S&P 500 fell 56.10 points, or 0.74 percent, to 7,553.68, while the tech-heavy Nasdaq dropped 239.93 points, or 0.89 percent, to 26,853.98.

The declines ended nine consecutive sessions of gains for both the S&P 500 and the Nasdaq.

The main drag on investor sentiment was the deteriorating situation in the Middle East and the resulting surge in oil prices.

Iran's Islamic Revolutionary Guard Corps said it struck U.S. Air Force facilities in Kuwait and the U.S. Navy's Fifth Fleet base in Bahrain in retaliation for attacks on an Iranian oil tanker and communications facilities on Qeshm Island.

Earlier, U.S. forces struck a radar facility on Qeshm Island on June 1 and fired missiles at an Iranian oil tanker on June 2. The absence of meaningful progress in cease-fire talks between the two sides has since rekindled fears of a broader military confrontation.

Oil markets reacted immediately.

Brent crude futures settled at $97.81 a barrel, up 1.9 percent from the previous session, while West Texas Intermediate futures rose 2.4 percent to $96.02 a barrel.

Markets are closely watching tensions around the Strait of Hormuz and the risk of disruptions to Middle Eastern oil supply. With prices approaching triple digits again, concerns about a resurgence in inflation are also mounting.

The bond market came under pressure as well.

According to electronic trading platform Tradeweb, the yield on the 10-year U.S. Treasury note stood at 4.49 percent near the close of New York trading, up 0.03 percentage point from the previous session. During the session it briefly topped 4.5 percent, breaking through a key psychological resistance level.

The 30-year yield also climbed 0.02 percentage point to 4.99 percent, briefly crossing 5.0 percent intraday.

Bond yields move inversely to prices, so the rise in yields reflects a decline in bond prices.

Technology stocks also weakened. Nvidia, the bellwether AI chip stock, fell 3.62 percent.

However, memory chip stocks that led the recent rally held their ground. Micron gained 1.45 percent, SanDisk rose 6.71 percent and Western Digital advanced 5.51 percent.

Stronger-than-expected U.S. employment data added further upward pressure on yields.

ADP reported that private-sector payrolls grew by 122,000 in May from the prior month, the largest monthly gain since January last year.

With a resilient labor market and rising oil prices converging, markets began pricing in the possibility of additional Federal Reserve tightening.

CME FedWatch data showed fed funds futures markets placing the probability of the Fed raising its benchmark interest rate by at least 0.25 percentage point by the December Federal Open Market Committee meeting at around 57 percent.


sjy@heraldcorp.com