Stocks fell for a third straight session Tuesday as bond yields pushed to their highest levels in nearly two decades, with traders bracing for Wednesday's close of the third quarter still rattled by the standoff over the Strait of Hormuz. The S&P 500 slid 0.8% to 7,683.69, the Dow Jones Industrial Average lost 0.7%, or 347 points, to 51,481.10, and the Nasdaq Composite dropped 0.9% to 26,820.38. ARM Holdings was the index's biggest laggard, down 8.7%.
Yields Do the Damage
The 10-year Treasury yield touched 5.234% intraday, its highest level since 2007, before settling just above 5.26%. The 30-year touched levels last seen in 2004, and the 2-year climbed to 5.163%. The move tracked a rise in oil prices after President Trump rejected an offer from Tehran to reopen shipping through the Strait of Hormuz; crude for November delivery rose 1.11% to $90.37 a barrel, and the CME FedWatch tool showed traders now pricing a 70.3% probability of another quarter-point rate increase in October, up from 57.6% a week earlier and just 17.7% a month ago. The VIX volatility index jumped 8.1% to 16.07.
Gold, which tends to benefit when both inflation fears and geopolitical risk are rising at once, climbed 0.96% to $4,220 an ounce. The dollar index held near a two-month high around 101.3, adding to the pressure on commodity-linked and emerging-market assets.
The tension has real trade flowing through it: oil-market analytics tracked by Reuters and Kpler show roughly 10 million barrels a day still moving through the Strait, about half of pre-war volumes, as tankers carrying Iranian crude continue to stack up along the coastline under the reinstated U.S. blockade.
Futures pointed to a steadier open Wednesday, the last trading session of the quarter: S&P 500 futures were up 0.13% to 7,741.75, Dow futures added 0.21% to 51,811, and Nasdaq futures were roughly flat. Whether that holds may depend on how the Hormuz standoff, and the rate path it is scrambling, develop before the bell.
Trading volume ran heavy at nearly 16.7 billion shares, with eight of the S&P 500's eleven sectors still finishing in the green even as the headline indexes fell — a split that traders pointed to as evidence the selling was concentrated in rate-sensitive technology and communications names rather than broad-based. Industrials were the session's best performer, while communication-services and energy stocks lagged.
