US Stocks Drop Friday as Oil Rises Above $102 and Bond Yields Climb

TLDR

• The Dow, S&P 500, and Nasdaq all fell Friday as bond yields and oil prices rose
• The 10-year Treasury yield climbed back above 5%, pressuring stocks
• WTI crude oil topped $102 a barrel, adding to inflation concerns
• The Fed raised rates by 25 basis points this week, but traders see more hikes coming
• Odds of another half-point in rate hikes this year rose to 44.3%

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The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all slipped on Friday as rising bond yields and climbing oil prices wiped out early morning gains.

The Dow fell around 200 points, or 0.4%. The S&P 500 dropped 0.2%, and the Nasdaq was down 0.1%.

The moves came on a “triple witching” day, when options and futures expire across various traded products. Charles Schwab’s head trading strategist Joe Mazzola warned that volatility could pick up again next week as quarter-end position shifts take place.

The 10-year Treasury yield rose back above 5%, while the 2-year yield climbed to 4.75%. Higher yields tend to weigh on stocks by making borrowing more expensive and bonds more attractive to investors.

Oil Adds to Pressure

WTI crude oil futures rose 0.9% to around $102.82 a barrel after briefly trading lower in the morning. Oil has stayed elevated as disruptions in the Strait of Hormuz, tied to the ongoing conflict in Iran now in its seventh month, continue to push energy prices higher.

BREAKING: Saudi Arabia has informed European refiners that they will be allocated no crude oil next month amid the East-West pipeline shutdown, per Bloomberg.

European customers normally receive Saudi Arabian crude oil shipments on “term contracts,” which are meant to ensure a…

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Analysts say the energy shock is complicating the inflation picture for central banks around the world.

The Federal Reserve raised interest rates by 25 basis points this week, its first hike in three years. Markets had widely expected the move and stocks initially climbed after the decision.

But confidence that one hike will be enough to tame inflation is limited. JPMorgan Chase CEO Jamie Dimon told Yahoo Finance this week: “It’s not clear to me we’ve slayed inflation.”

Rate Hike Bets Rise

Traders are now pricing in more tightening ahead. According to the CME FedWatch Tool, odds of an additional half-point in rate hikes this year rose to 44.3% on Friday, up from 41.7% on Thursday. Odds that rates are held steady fell to 9.8% from 11%.

Oil prices dipping below $100 earlier in the week had offered some brief relief. But prices have since climbed back up, keeping pressure on inflation.

Chip stocks mostly held up this week after a mid-week sell-off. The PHLX Semiconductor index was down only slightly on the week. The sell-off had been partly tied to Anthropic and OpenAI calling for a slowdown in AI development.

The Bank of Japan also raised interest rates to their highest level in 31 years this week, adding another layer of complexity to global markets.

With no major earnings reports or economic data due Friday, investors were left focused on how far the Fed might go if inflation stays high.

The Dow was on pace for a weekly decline heading into the close.