Equities Decline as Oil Surge and Rising Yields Fuel Inflation Worries

The S&P 500 Index ($SPX) (SPY) closed down -0.48%, the Dow Jones Industrial Average ($DOWI) (DIA) fell -0.77%, and the Nasdaq 100 Index ($IUXX) (QQQ) dropped -0.29%. E-mini S&P futures (ESU26) declined -0.46%, and September E-mini Nasdaq futures (NQU26) lost -0.30%.

Stock indexes retreated Wednesday, with the Dow hitting a 5-week low. The broader market faced pressure for a second consecutive session amid mounting inflation concerns. WTI crude oil jumped over +3% to a 3.25-month high, driven by escalating Middle East tensions that raised worries about energy flows through the Strait of Hormuz. The oil surge is amplifying inflation expectations and pushing bond yields higher, with the 10-year T-note yield reaching 4.85% — the highest in 2.75 years.

On the upside, chipmakers and AI-infrastructure stocks gained, while energy producers rose alongside stronger crude prices.

The escalating US-Canada trade war continues to weigh on sentiment. Canada imposed tariffs of 15% to 50% on hundreds of US goods in retaliation for last month’s 50% tariffs on $20 billion of Canadian imports. The US responded by blocking some Canadian imports, imposing new tariffs, and seeking to bar Canadian companies from US government contracts.

US MBA mortgage applications fell -2.7% for the week ended September 4, with purchase mortgages down -0.2% and refinancing down -6.2%. The average 30-year fixed-rate mortgage rose 6 bp to a 14-month high of 6.85%, up from 6.79% the prior week.

October WTI crude oil (CLV26) surged over +3% to a 3.25-month high amid the latest Middle East escalation. The US destroyed five Iranian tankers carrying crude after Iran attempted to strike US Navy ships with ballistic missiles. Iran retaliated by firing missiles at a US air base in Jordan and warning ships in the Persian Gulf. Iran also stated it is prepared for intensified warfare and will escalate counterstrikes if the US continues attacking its territory.

Markets are pricing in a 61% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas markets closed mixed. The Euro Stoxx 50 fell to a 5-week low, down -1.58%. China’s Shanghai Composite rose +0.28%, while Japan’s Nikkei-225 dipped -0.19%.

Interest Rates

December 10-year T-notes (ZNZ6) closed down -7.5 ticks. The 10-year T-note yield rose +4.5 bp to 4.833%, with T-notes hitting a 20-month nearest-futures low. The yield reached a 2.75-year high of 4.853%. T-notes came under pressure from higher crude oil prices boosting inflation expectations, and extended losses after the Treasury announced it would buy back up to $6 billion in longer-dated Treasuries — below the expected $10 billion.

T-notes recovered from their worst levels on strong demand for the Treasury’s $39 billion 10-year auction, which posted a bid-to-cover ratio of 2.71 versus a 10-auction average of 2.49.

European government bond yields moved higher: the 10-year German bund yield climbed to a 15-year high of 3.444%, up +7.8 bp, and the 10-year UK gilt yield rose +8.8 bp to 5.261%.

French July manufacturing production unexpectedly fell -0.8% m/m, versus expectations of +0.4% m/m growth.

Markets are discounting a 100% chance of a +25 bp ECB rate hike at Thursday’s policy meeting.

US Stock Movers

Telecommunication and cable stocks declined, led by Comcast (CMCSA) at -6% after its CFO cited no improvement in Q3 broadband subscriber losses. Charter Communications (CHTR) fell over 8%, while Verizon (VZ) and AT&T (T) dropped more than 1%.

Chipmakers and AI-infrastructure stocks advanced, limiting broader market losses. Marvell Technology (MRVL) rose over +4%, AMD gained +3%, Micron (MU) up +2%, and ARM (ARM), Western Digital (WDC), SanDisk (SNDK), Intel (INTC), Texas Instruments (TXN), and Qualcomm (QCOM) all closed up more than +1%.

Energy producers rallied after WTI crude rose over +3%. APA Corp (APA) and ExxonMobil (XOM) gained over +2%, with Chevron (CVX), Devon Energy (DVN), Diamondback (FANG), Occidental Petroleum (OXY), ConocoPhillips (COP), and Valero (VLO) all up more than +1%.

ServiceTitan (TTAN) plunged over -29% after reporting a Q2 EPS loss of -26 cents, missing the -25 cent consensus. Casy’s General Stores (CASE) fell over -14% after Q1 gross margin of 21.8% missed the 22.3% consensus. Chewy (CHWY) dropped over -10% on a forecast for sequential Q3 gross margin decline due to a rebate timing shift. Smithfield Foods (SFD) fell over -6% after cutting Q3 earnings outlook. Dyne Therapeutics (DYN) lost over -5% following a JPMorgan downgrade to underweight. Booking Holdings (BKNG) slid over -3% after losing an EU court battle over its Etraveli Group takeover.

Chime Financial (CHYM) rose over +7% after raising full-year revenue guidance to $2.76-$2.77 billion. Meta Platforms (META) gained over +6% on positive analyst reception of its Muse AI assistant launch. HP Inc (HPQ) rose over +3% on a Red Hat AI platform partnership. Sysco (SYY) gained over +2% after raising mid-term financial targets for fiscal years 2028-2029.

Earnings Reports (9/10/2026)

Adobe Inc (ADBE), Copart Inc (CPRT), Macy’s Inc (M), Oracle Corp (ORCL).

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