U.S. stocks retreated sharply on Friday as spiking crude prices ignited global inflation fears, with all three major indexes declining more than 1%. According to reports from The Economic Times, the Dow Jones Industrial Average fell 537.29 points (1.07%) to 49,526.17, the S&P 500 lost 92.74 points (1.24%) to 7,408.50, and the Nasdaq Composite dropped 410.08 points (1.54%) to 26,225.15. The selloff was driven by a jump in benchmark Treasury yields, reflecting surging energy prices and concerns about long-term inflation, which made equities less attractive compared to safer fixed-income alternatives. Fed Chair Jerome Powell's eight-year run officially ended today, marking the end of one of the wildest Fed eras in history as markets faced heavy pressure from sharply rising yields and renewed inflation concerns.
The 10-year Treasury note yield touched its highest level since May 2025, as reported by The Economic Times. US Treasury yields surged across the curve, with the 2-year note yield rising 8.7 basis points on the day and 19.0 basis points for the week to 4.079% — the highest level since March 2025. The 10-year yield climbed 13.8 basis points today and 23.7 basis points for the week to 4.597%, its highest level since May 2025. WTI crude for July delivery surged $4.24, or 4.37%, to settle at $101.16, with crude oil rallying $6.48, or 6.84%, for the week. The yield increases reflect investor concerns about potential rate hikes if a protracted Iran war leads to sticky inflation. Global bond yields also jumped on growing evidence of the Iran war's widespread economic damage.
Incoming Fed Chair Kevin Warsh is saddled with the potential need for a rate hike if a protracted Iran war leads to sticky inflation, according to The Economic Times. The odds of the Fed hiking interest rates by 25 basis points in December are approaching 40%, up from 13.6% a week ago, according to CME Group's FedWatch tool. However, Warsh will hold just one vote on a 12-member FOMC committee, making his influence limited compared to Powell's previous leadership. Market strategists noted that the weakness highlights concerns that recent inflation numbers aren't transient, with the new chair likely communicating a neutral policy stance at best until consistent, meaningful data changes occur. Market pricing has shifted noticeably, with traders now seeing a greater likelihood of additional tightening rather than easing - a shift that runs counter to Warsh's previous advocacy for lower rates.
Among the 11 major sectors in the S&P 500, energy shares jumped 2.3%, while the Philadelphia SE Semiconductor Index slid 4%, dragged lower by AI hyperscaler stocks. According to The Economic Times, Nvidia and AMD fell by 4.4% and 5.7% respectively, while Intel dropped 6.2%. Microsoft rose 3.1% following the disclosure of a new position in the company taken by Bill Ackman's hedge fund Pershing Square. Ford dropped 7.5%, retreating from a near 21% surge over the last two sessions on optimism over the automaker's energy storage business. Small-cap stocks were hit particularly hard as rising yields pressured growth and financing expectations, with the Russell 2000 falling 2.44% Friday and closing the week down 2.37%.
Despite the Friday selloff, the S&P 500 logged its seventh straight weekly gain, its longest streak since a nine-week run ended in December 2023, as reported by The Economic Times. However, the Dow and Nasdaq fell on the week, with the Nasdaq snapping a six-week winning streak. The Nasdaq dropped 1.54% on the day and slipped 0.08% for the week, while the Dow fell 1.07% on the day and ended the week down 0.17%. Market strategists noted that there's a realization that the market had gotten ahead of itself, paying too little attention to bond market and economic data while being caught up in the momentum AI trade. The declining issues outnumbered advancers by a 3.88-to-1 ratio on the NYSE, with 128 new highs and 32 new lows on the S&P 500.
