US Markets Close Lower as Surging Treasury Yields Pressure Stocks

US stocks ended Monday sharply lower as a renewed surge in Treasury yields and rising oil prices weighed on investor sentiment. The Dow Jones Industrial Average dropped 347.11 points, or 0.7%, to close at 51,481.51. The S&P 500 fell 0.77% to 7,683.69, while the Nasdaq Composite lost 0.92%, ending at 26,820.38.

Treasury Yields Hit 19-Year High

The bond market dominated Monday’s trading action. The 10-year Treasury yield climbed to 5.25%, marking its highest level since June 2007. The move reflects strengthening expectations that the Federal Reserve will need to tighten monetary policy further to contain inflation, particularly as energy prices continue to rise.

“As expectations for hawkish Fed policy gain traction, this week brings a rather packed macroeconomic calendar, with particular focus on the US labor market and inflation,” said Ipek Ozkardeskaya, senior analyst at Swissquote. Markets are currently pricing in a 68% probability that the Fed will raise rates again in October.

Nvidia Bucks the Trend with Record Buyback

In a rare bright spot, Nvidia shares gained 1.68% to close at $228.86 after the company announced the largest buyback authorization increase in history. The chipmaker’s board approved an additional $150 billion in share repurchases, bringing the total remaining authorization to $235 billion.

The announcement underscores Nvidia’s confidence in its AI-driven growth trajectory despite broader market headwinds. The stock’s market capitalization rose by approximately $167 billion on the news.

Semiconductor and Memory Stocks Tumble

Despite Nvidia’s gains, the broader semiconductor sector suffered significant losses. Arm Holdings plunged more than 8%, while SK Hynix dropped 4.48%. Intel fell over 3%, and SanDisk and Western Digital each declined more than 3%. AMD lost approximately 4%, and Micron Technology dropped about 2%.

Boeing Drags Dow Lower on FAA Certification Delay

Boeing shares sank 6.3% after the Federal Aviation Administration announced it would delay certification of the 737 MAX 10 until a newly disclosed software issue is resolved. FAA Administrator Bryan Bedford said the agency would hold off “until we’re satisfied that we don’t have an issue here”.

The software problem, disclosed by Boeing over the weekend, could prevent pilots from accessing automated flight guidance during a specific landing scenario. The delay represents a significant setback for Boeing’s efforts to bring the largest 737 MAX variant to market and regain ground lost to Airbus.

Sector Performance: Defensives Outperform

Within the S&P 500, eight of eleven sectors closed lower. Consumer staples was the top-performing sector with a gain of 0.4%, as investors rotated into defensive names amid rising yields and macro uncertainty. Communication services was the worst performer, falling 1.66%, pressured by high-growth and advertising-driven names like Meta Platforms, which dropped 4.79%.

Materials and consumer discretionary also underperformed, while energy was among the few sectors trading in the green.

Oil Rises on Geopolitical Tensions

Oil prices climbed after President Trump rejected an offer from Iran for a seven-day ceasefire and a phased reopening of the Strait of Hormuz. Brent crude rose 2% to $106 per barrel. The geopolitical uncertainty added to inflationary concerns already weighing on markets.

What’s Ahead

Investors are now focused on two major economic data releases later this week. The Personal Consumption Expenditures (PCE) report, the Fed’s preferred inflation gauge, is due Wednesday, followed by the September jobs report on Friday. These data points will provide critical insight into the health of the US economy and the likely path of monetary policy.

As Daniela Hathorn, senior market analyst at Capital.com, noted: “Corporate earnings remain a key driver of long-term stock market momentum. The bar is set higher, and tolerance for disappointment is diminishing”.