All three major U.S. stock indexes veered lower as a jump in benchmark Treasury yields, reflecting surging energy prices and concerns about long-term inflation, offered an attractive alternative to higher-risk equities.
“There’s a realization that the market had gotten way ahead of itself,” said Kenny Polcari, chief market strategist at Slatestone Wealth in Jupiter, Florida. “It wasn’t paying enough attention to what the bond market and economic data is telling it. It was caught up in this momentum AI trade.” Crude prices surged after combative comments from U.S. President Donald Trump and Iran’s Foreign Minister Abbas Araqchi raised doubts as to whether their countries’ fragile truce would hold and dampened hopes that normal traffic through the crucial Strait of Hormuz would soon resume. Trump’s meeting with Chinese President Xi Jinping concluded with few tangible results to show for it, with Beijing offering no clear help toward resolving the U.S.-Iran conflict.
“It certainly was encouraging to see both countries engaging again at the highest level. Historically, these type of events bring about headlines outlining various commitments,” said Matthew Keator, managing partner at the Keator Group, a wealth management firm in Lenox, Massachusetts. “This week’s meeting seemed like more of a reset in relations between the two countries and less short-term, quantifiable results.”
The yield on 10-year Treasury notes, an indicator of global borrowing costs, touched its highest level since May 2025, when markets were reeling from Trump’s “Liberation Day” tariff proclamation. Global bond yields also jumped on growing evidence of the Iran war’s widespread economic damage.
END OF POWELL ERA
Friday marks Jerome Powell’s last day as U.S. Federal Reserve chair, a position he has held through the pandemic, periods of inflation, and interest rate hiking and cutting cycles.Incoming Chair Kevin Warsh is saddled with the potential need for a rate hike if a protracted Iran war leads to sticky inflation.
“The weakness today is highlighting the concerns that the recent (inflation) numbers aren’t transient, and it’s hard to envision the new chair communicating anything other than a neutral policy stance at best until we see some consistent, meaningful change in the data,” Keator added.
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.
According to preliminary data, the S&P 500 lost 91.62 points, or 1.22%, to end at 7,409.62 points, while the Nasdaq Composite lost 412.61 points, or 1.53%, to 26,226.35. The Dow Jones Industrial Average fell 537.35 points, or 1.06%, to 49,531.70.
The Philadelphia SE Semiconductor Index was dragged lower by stocks that have benefited from the AI hyperscaler phenomenon.
Nvidia, AMD and Intel ended the session sharply lower. Microsoft rose following the disclosure of a new position in the company taken by Bill Ackman’s hedge fund Pershing Square. Dexcom jumped after the medical device maker’s announcement that it will appoint two independent directors and revamp a board committee in collaboration with activist investor Elliott Investment Management.
Ford slid, retreating from a near 21% surge over the last two sessions on optimism over the automaker’s energy storage business.
