US 10-year Treasury yield hits 5.24%, highest in 19 years

Strait of Hormuz fears push oil higher, reigniting rate-hike anxiety

Traders watch screens on the floor of the New York Stock Exchange. [AP]
Traders watch screens on the floor of the New York Stock Exchange. [AP]

All three major US stock indexes fell Monday as escalating tensions between the United States and Iran drove international oil prices and Treasury yields higher in tandem.

Fears that a disruption to crude supply could reignite inflation pushed the 10-year US Treasury yield to its highest level in roughly 19 years, while markets rapidly priced in a greater chance of another Federal Reserve benchmark interest rate hike.

The Dow Jones Industrial Average closed down 347.11 points, or 0.67 percent, at 51,481.51. The S&P 500 fell 59.72 points, or 0.77 percent, to 7,683.69, and the NASDAQ Composite — heavily weighted toward technology shares — dropped 248.34 points, or 0.92 percent, to 26,820.38.

Oil prices surged and selling in Treasuries resumed after the United States rejected Iran's "seven-point plan," which included a proposal to reopen the Strait of Hormuz.

The 10-year US Treasury yield, the global benchmark for borrowing costs, stood at 5.241 percent as of 3 p.m., up 6.1 basis points from the previous session — its highest level since June 12, 2007. The 30-year yield climbed to 5.561 percent at the same time, its highest since June 10, 2002.

International crude prices surged more than 4 percent during trading on supply-disruption fears before paring gains as the prospect of US-Iran dialogue came back into focus.

November-delivery Brent crude futures settled up 0.92 percent at $105.28 a barrel, while November-delivery West Texas Intermediate rose 0.21 percent to $92.60 a barrel.

Among individual stocks, results were mixed for major technology companies and blue chips. Nvidia rose 1.68 percent after announcing a $150 billion share buyback — the largest in US corporate history — partially cushioning the broader index decline.

Tesla fell 3.94 percent after JPMorgan cut its price target, citing weak third-quarter delivery numbers. Boeing dropped 6.91 percent after the Federal Aviation Administration said certification of the 737 MAX 10 — the largest variant in the MAX series — would be delayed due to a software issue.

Expectations for another rate hike grew. According to CME FedWatch, interest rate futures markets put the probability of the Federal Reserve raising its benchmark interest rate by 25 basis points at the October FOMC meeting at 70.3 percent.

The dollar strengthened, with the US Dollar Index — which tracks the greenback against six major currencies — rising to 101.219. Gold fell under pressure from higher Treasury yields and a stronger dollar, with spot gold prices dropping 3.61 percent to $4,131.53 per ounce.


th5@heraldcorp.com