Global Markets Retreat as Oil Surge Ignites Inflation Fears and Yield Spike

The S&P 500 Index ($SPX) (SPY) closed down by 0.45% on Tuesday, while the Dow Jones Industrial Average ($DOWI) (DIA) fell 0.63%, and the Nasdaq 100 Index ($IUXX) (QQQ) declined 0.65%. E-mini S&P futures (ESU26) dropped 0.44%, and September E-mini Nasdaq futures (NQU26) fell 0.61%.

Stock indexes settled lower on Tuesday, with the S&P 500 and the Dow Jones Industrials falling to six-week lows. Stocks faced mounting pressure as elevated crude oil prices stoked inflation expectations and drove bond yields higher globally. Crude prices surged more than 4% on Tuesday, pushing the 10-year T-note yield to a 19-year high of 5.04%. Meanwhile, the 10-year German Bund yield climbed to a 17-year high of 3.57%, and the 10-year Japan JGB yield rose to a 30-year high of 3.04%.

Enthusiasm for the AI trade, a major driver of stock gains this year, remains tempered as debate persists over the technology’s potential for catastrophic harm and the likelihood of regulatory slowdowns. Additionally, cryptocurrency-exposed stocks tumbled on Tuesday, with Bitcoin falling more than 4% after the Senate blocked a digital asset market structure bill in a procedural vote.

Stock losses were limited as chipmakers and AI-infrastructure stocks recovered some of Monday’s sell-off and moved higher. Energy producers also rallied on Tuesday, supported by crude oil prices rising more than 4%.

Adding to bearish sentiment, the September Empire State manufacturing survey of general business conditions fell 13.0 points to 7.6, well below expectations of 15.0.

Weaker-than-expected economic data from China weighed on global growth prospects and stock sentiment. China’s August retail sales rose 0.4% year-over-year, missing expectations of 0.8%. Additionally, the surveyed unemployment rate unexpectedly rose to 5.3% in August, indicating a softer labor market than anticipated. New home prices also declined by 0.17% month-over-month, marking the thirty-ninth consecutive monthly drop. On a positive note, August industrial production grew 5.2% year-over-year, outperforming expectations of 4.8%.

October WTI crude oil prices (CLV26) surged more than 4% on Tuesday to a 3.75-month high. Prices are climbing as supply disruptions in the Middle East persist, tightening global oil supplies. Last Friday, Saudi Arabia closed a major pipeline following attacks, disrupting a key route bypassing the Strait of Hormuz. The East-West pipeline, which transports 7 million barrels per day of crude, was shut after threats from Houthi rebels, with officials providing no timeline for reopening. The pipeline channels oil from the Persian Gulf to the Red Sea for tanker loading. Saudi Arabia reported to OPEC that its August crude production fell to 6.238 million barrels per day, the lowest level since 1990.

Markets are pricing in a 96% probability of a 25 basis point Federal Reserve rate hike at the upcoming Tuesday-Wednesday FOMC meeting.

Overseas stock markets also settled lower on Tuesday. The Euro Stoxx 50 fell to a 2.25-month low, closing down 0.38%. China’s Shanghai Composite declined 0.54%, while Japan’s Nikkei-225 Stock Average edged down 0.01%.

Interest Rates

December 10-year T-notes (ZNZ6) closed down by 7.5 ticks on Tuesday. The 10-year T-note yield rose 1.0 basis point to 4.998%. T-notes fell to a new 2.75-year nearest futures low, and the 10-year T-note yield reached a 19-year high of 5.039%. The 4% surge in WTI crude oil prices to a 3.75-month high on Tuesday elevated inflation expectations, undercutting T-notes. Furthermore, heightened expectations of a 25 basis point interest rate hike by the Federal Reserve at the Tuesday-Wednesday FOMC meeting continue to weigh on T-note prices. T-notes held their losses despite weak demand for the Treasury’s $13 billion auction of 20-year T-bonds, which saw a bid-to-cover ratio of 2.57, below the 10-auction average of 2.62.

European government bond yields moved higher on Tuesday. The 10-year German bund yield climbed to a 17-year high of 3.573%, finishing up 2.0 basis points at 3.538%. The 10-year UK gilt yield rose 2.1 basis points to 5.388%.

The German September ZEW survey of economic expectations rose 0.5 points to a seven-month high of 34.7, missing expectations of 40.0.

Markets are pricing in a 56% chance of a 25 basis point ECB rate hike at the European Central Bank’s next meeting on October 29.

US Stock Movers

Cryptocurrency-exposed stocks sold off on Tuesday as Bitcoin (^BTCUSD) fell more than 4% following the Senate’s block of a digital asset market structure bill in a procedural vote. Circle Internet Group (CRCL) closed down more than 11%, and Coinbase Global (COIN) fell more than 10% to lead losers in the S&P 500. Additionally, Galaxy Digital Holdings (GLXY) dropped more than 8%, and Riot Platforms (RIOT) fell more than 6%. Strategy (MSTR) closed down more than 5%, Iren Ltd (IREN) declined more than 4%, and MARA Holdings (MARA) and Robinhood Markets (HOOD) fell more than 3%.

Software stocks retreated on Tuesday, giving back some of Monday’s gains. Oracle (ORCL) and Thomson Reuters (TRI) fell more than 3%, while Intuit (INTU) and Adobe Systems (ADBE) declined more than 2%. Additionally, Atlassian Corp (TEAM), Microsoft (MSFT), Salesforce (CRM), ServiceNow (NOW), and Workday (WDAY) closed down more than 1%.

Airlines and cruise line operators fell on Tuesday after crude prices jumped more than 4%, raising fuel costs and pressuring profitability prospects. American Airlines Group (AAL), Royal Caribbean Cruises (RCL), and Norwegian Cruise Line Holdings (NCLH) closed down more than 2%. United Airlines Holdings (UAL), Alaska Air Group (ALK), Delta Air Lines (DAL), and Carnival (CCL) also declined more than 1%.

Some chipmakers and AI stocks moved higher on Tuesday, limiting losses in the broader market. The iShares Semiconductor ETF (SOXX) closed up 0.40%. Qualcomm (QCOM) rose more than 4% to lead gainers in the Nasdaq 100. Advanced Micro Devices (AMD) and ON Semiconductor (ON) also closed up more than 2%, while ARM Holdings Plc (ARM), Marvell Technology (MRVL), and ASML Holding NV (ASML) gained more than 1%. NXP Semiconductors NV (NXPI) closed up 0.95%.

Energy stocks and service providers rallied on Tuesday following a rise in WTI crude oil of more than 4%. APA Corp (APA) closed up more than 5%, while ConocoPhillips (COP), Devon Energy (DVN), Phillips 66 (PSX), and Valero Energy (VLO) gained more than 3%. Diamondback Energy (FANG), Marathon Petroleum (MPC), Occidental Petroleum (OXY), and ExxonMobil Holdings (XOM) also closed up more than 2%. Chevron (CVX) rose more than 2% to lead gainers in the Dow Jones Industrials.

Enova International (ENVA) closed down more than 23% after withdrawing its application with the Office of the Comptroller of the Currency and the Federal Reserve for the acquisition of Grasshopper Bancorp.

Dave & Buster’s Entertainment (PLAY) closed down 18% after reporting Q2 revenue of $544.1 million, below the consensus estimate of $558.1 million.

Axon Enterprise (AXON) closed down more than 9% to lead losers in the Nasdaq 100 after announcing plans to offer $1 billion of convertible senior notes due in 2031 in a public offering.

Revvity (RVTY) closed up more than 9% after company executives at a Baird Global Healthcare Conference stated that demand for its new high-end platform has “really taken off.”

Forgent Power Solutions (FPS) closed up more than 9% after reporting Q4 revenue of $461.7 million, well above the consensus estimate of $432 million.

Waystar Holding Corp (WAY) closed up more than 7% after a Reuters report indicated the company is exploring strategic options, including a potential sale.

Earnings Reports (9/16/2026)

Aeluma Inc (ALMU) and Lennar Corp (LEN).

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