Stocks Slide to Multi-Week Lows as Crude Oil Surge Ignites Inflation Fears and Rate Hike Bets

The S&P 500 Index closed down 0.58% on Thursday, while the Dow Jones Industrial Average fell 0.60% and the Nasdaq 100 Index dropped 1.08%. E-mini S&P futures fell 0.61%, and September E-mini Nasdaq futures declined 1.07%.

Stock indexes settled lower on Thursday, with the S&P 500 and Dow Jones Industrials dropping to five-week lows. Soaring energy prices pushed global bond yields sharply higher, weighing on equities. WTI crude oil surged more than 6% to a 3.5-month high amid fears that the US-Iran conflict will persist, increasing inflation risks and prompting global central banks to maintain a hawkish stance on interest rates. The 10-year UK Gilt yield jumped to a 19-year high of 5.38%, the 10-year German Bund yield surged to a 17-year high of 3.51%, and the 10-year T-note yield rose to a 2.75-year high of 4.96%.

Stocks extended their losses on Thursday as T-note yields climbed further following the release of the August Producer Price Index (PPI), which rose more than expected, signaling persistent price pressures. Additionally, low weekly jobless claims signaled continued strength in the labor market.

US weekly initial unemployment claims fell by 1,000 to 206,000, close to expectations of 205,000, signaling a stable labor market.

US August PPI final demand rose 5.4% year-over-year, stronger than expectations of 5.3%. August PPI excluding food and energy rose 4.6% y/y, right in line with expectations.

US August existing home sales fell 2.0% month-over-month to a 14-month low of 3.98 million, right in line with expectations.

The escalating trade war between the US and Canada is also weighing on market sentiment. On Tuesday, Canada imposed tariffs ranging from 15% to 50% on hundreds of US goods in retaliation for last month’s US action to impose 50% tariffs on $20 billion of imports from Canada. The US responded by moving to block imports of some Canadian products, slapping new tariffs on others, and seeking to bar Canadian companies from selling to US government contractors.

October WTI crude oil prices surged more than 6% on Thursday to a 3.5-month high. Crude prices are climbing after Iran stated that it is ready for a more intense war and will escalate counterstrikes if the US continues attacking its territory and infrastructure. The prospect of a prolonged conflict that limits crude supplies from the Middle East is underpinning oil prices. Crude prices added to their gains after Saudi Arabia told OPEC that its crude production in August fell to 6.238 million barrels per day, the lowest level since 1990.

Markets are pricing in a 75% chance of a 25 basis point rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets settled mixed on Thursday. The Euro Stoxx 50 dropped to a six-week low, closing down 0.67%. China’s Shanghai Composite fell 0.43%, while Japan’s Nikkei-225 Stock Average rose 0.20%.

Interest Rates

December 10-year T-notes closed down by 23 ticks. The 10-year T-note yield rose 10.7 basis points to 4.948%. T-notes tumbled to a 2.75-year nearest futures low on Thursday, and the 10-year T-note yield reached a 2.75-year high of 4.963%. T-notes sold off as crude oil prices surged, boosting inflation expectations. WTI crude oil rose more than 6% to a 3.5-month high, lifting the 10-year breakeven inflation rate to a 3.25-month high of 2.419%.

On the positive side for T-notes was the decline in US August existing home sales to a 14-month low. T-notes also found support on strong demand for the Treasury’s $22 billion auction of 30-year T-bonds, which had a bid-to-cover ratio of 2.61, well above the 10-auction average of 2.40.

European government bond yields moved sharply higher on Thursday. The 10-year German bund yield jumped to a 17-year high of 3.508%, finishing up 5.7 basis points to 3.501%. The 10-year UK gilt yield soared to a 19-year high of 5.376%, finishing up 11.2 basis points to 5.374%.

The ECB, as expected, raised the deposit facility rate by 25 basis points to 2.50% and stated that inflation will stay above 2% for an “extended period.”

The ECB raised its 2026 Eurozone GDP forecast to 0.9% from a prior forecast of 0.8%, while keeping its 2026 inflation excluding food and energy forecast unchanged at 2.5%.

Markets are pricing in a 97% chance of a 25 basis point ECB rate hike at the ECB’s next meeting on October 29.

US Stock Movers

Chipmakers and AI-infrastructure stocks retreated on Thursday, pressuring the broader market. CoreWeave, Intel, and Lam Research closed down more than 5%, while Micron Technology and Western Digital fell more than 4%. Additionally, ARM Holdings, SanDisk, Advanced Micro Devices, KLA Corp, Marvell Technology, and Applied Materials closed down more than 3%, and Nvidia, ASML Holding NV, and Seagate Technology Holdings Plc fell more than 2%.

Copper-producing stocks are falling, with copper prices down more than 4% after Reuters reported that the White House has not yet made a decision on refined copper tariffs as it weighs concerns of higher prices raising manufacturing costs against the potential benefits of encouraging more domestic mining. Southern Copper closed down more than 7%, and Freeport-McMoRan fell more than 6%. Additionally, Rio Tinto Plc closed down more than 4%, and Newmont Corp fell more than 2%.

Home builders and suppliers moved lower on Thursday after the 10-year T-note yield jumped to a 2.75-year high, pushing up mortgage rates and weighing on housing demand. Lennar, KB Home, and Builders FirstSource closed down more than 3%. Additionally, DR Horton and Pulte Group fell more than 2%, while Toll Brothers and Home Depot closed down more than 1%.

Cooper Cos closed down more than 14% to lead losers in the S&P 500 after reporting Q3 net sales of $1.07 billion, below the consensus of $1.10 billion, and cutting its full-year revenue forecast to $4.23 billion to $4.25 billion from a previous forecast of $4.29 billion to $4.32 billion, weaker than the consensus of $4.31 billion.

American Eagle Outfitters closed down more than 13% after reporting Q2 comparable sales rose 6.00%, weaker than the consensus of 6.47%.

FactSet Research Systems closed down more than 5% after OpenAI said it is releasing ChatGPT for Financial Services, a new tool for investment bankers and equity researchers.

AeroVironment closed up more than 4% after reporting Q1 revenue of $480.5 million, stronger than the consensus of $455.8 million.

Apple closed up more than 3% to lead gainers in the Dow Jones Industrials after analysts were generally positive about the company’s new iPhone Duo, its first foldable phone.

Earnings Reports (9/11/2026)

Kroger Co/The and Rent the Runway Inc are scheduled to report earnings.

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