Stocks Under Pressure as Bond Yields Climb on Inflation Fears

The S&P 500 Index ($SPX) (SPY) is down by -0.29% today, the Dow Jones Industrial Average ($DOWI) (DIA) is down by -0.64%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -0.51%.  E-mini S&P futures (ESU26) are down -0.20%, and September E-mini Nasdaq futures (NQU26) are down -0.30%.

Stock indices are under pressure today, with the S&P 500 and Nasdaq 100 falling to 2-week lows and the Dow Jones Industrial Average falling to a 2.5-week low.  Rising oil prices today are boosting inflation risks and pushing bond yields higher. WTI crude oil climbed to a 1-month high today after President Trump threatened Iran with economic isolation, dimming prospects for both an imminent breakthrough in the war between Iran and the US and a normalization of crude flows through the Strait of Hormuz.  The 10-year T-note yield is up +4 bp to 4.69%.

Also, concerns about consumer spending are weighing on stocks, with Walmart down more than -9% after reporting weaker-than-expected Q2 comparable same-store sales and forecasting full-year adjusted EPS below the consensus.  

Today’s US economic news was better than expected, supporting stocks.  Weekly initial unemployment claims unexpectedly fell -6,000 to 206,000, showing a stronger labor market than expectations of an increase to 210,000. Also, the Aug Philadelphia Fed business outlook survey unexpectedly rose +6.0 to a 5.25-year high of 47.4, stronger than expectations of a decline to 24.8.   In addition, July leading indicators rose +0.2% m/m, stronger than expectations of +0.1% m/m.

Dovish comments today from San Francisco Fed President Mary Daly were supportive of stocks and bonds when she said the US Treasury market is signaling that monetary policy is in a good place right now, and she's "not seeing evidence" of a need for preemptive Fed rate hikes.

The lack of a clear path to a resolution in the Middle East is keeping the Strait of Hormuz closed and limiting crude supplies from the Middle East, keeping upward pressure on oil prices.  Sep WTI crude oil prices (CLU26) are up more than +1% today at a 1-month high after President Trump threatened Iran and its trading partners with economic isolation.  Mr. Trump said any country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face tremendous consequences.  However, Mr. Trump didn't specify what measures he would take or which countries he would target.

President Trump said he's not interested in extending the expired agreement with Iran, dimming prospects for a swift reopening of the Strait of Hormuz.  Mr. Trump also said that the US naval blockade on Iranian ports is putting pressure on the country, and he has no timeline for resolving the US-Iran conflict.

On Monday, US Energy Secretary Chris Wright said that the US is playing the long game with Iran, implying the US has no plans to de-escalate the conflict, potentially limiting crude supplied from the Middle East.

Treasury Secretary Bessent said last week that the administration will soon announce unprecedented economic measures against Iran that “have never been seen in the history of economic isolation of a country.”  The economic measures would add to the current US naval blockade of Iranian ports. 

There have been no signs of progress toward a US-Iran agreement to fully open the Strait of Hormuz.  An Iranian military spokesperson said last Thursday that no ship can safely pass the Strait of Hormuz without Iran’s authorization and supervision and that President Trump’s claims of control over the Strait are “nothing more than lies.”  The Iranian statement was in response to President Trump's comment last Tuesday that the US has “total control over the Hormuz Strait” and that “we own it.” 

The outlook for strong Q2 earnings is a bullish factor for stocks. The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and nearly four times the average earnings growth rate outside of the Covid period since Q4 of 2013, according to Bloomberg Intelligence.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.  So far, earnings results have been positive, with 86% of the 465 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 33% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets are mixed today.  The Euro Stoxx 50 slid to a 2.5-week low and is down -0.38%. China's Shanghai Composite closed up +0.24%.  Japan's Nikkei-225 Stock Average closed up +1.36%.

Interest Rates

September 10-year T-notes (ZNU6) are down by -8 ticks today.  The 10-year T-note yield is up +4.2 bp to 4.688%.  Sep T-notes are under pressure today from rising crude oil prices that boost inflation expectations.  WTI crude is up more than +2% today at a 1-month high, lifting the 10-year breakeven inflation rate to a 2-month high of 2.322%.  Today’s better-than-expected US economic news on weekly jobless claims, the Aug Philadelphia Fed business outlook survey, and July leading indicators is hawkish for Fed policy and is also weighing on T-note prices. 

Losses in T-notes are limited after San Francisco Fed President Mary Daly said she's "not seeing evidence" of a need for preemptive Fed rate hikes.

European government bond yields are mixed today.  The 10-year German bund yield fell from a 15-year high of 3.276% and is down -1.2 bp to 3.250%.  The 10-year UK gilt yield is up +0.7 bp to 5.051%.

German July PPI rose +1.1% m/m and +3.0% y/y, stronger than expectations of +0.6% m/m and +2.5% y/y, with the +3.0% y/y gain the largest year-on-year increase in 3.25-years.

Markets are discounting a 95% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

US Stock Movers

Cybersecurity stocks are sliding today after Axios reported that CrowdStrike CTO Zaitsev is leaving the company to launch an AI-cyber fund.  CrowdStrike Holdings (CRWD), Okta (OKTA), and Zscaler (ZS) are down more than 2%, and Cloudflare (NET) is down more than -1%. Also, Palo Alto Networks (PANW) is down -0.25%. 

Airline stocks and cruise line operators are falling today with WTI crude up more than +1% at a 1-month high. Norwegian Cruise Line Holdings (NCLH) is down more than -4%, and Carnival (CCL) is down more than -3%.  Also, United Airlines Holdings (UAL), American Airlines Group (AAL), Alaska Air Group (ALK), and Royal Caribbean Cruises (RCL) are down more than -2%.  In addition, Delta Air Lines (DAL) and Southwest Airlines (LUV), and are down more than -1%.

Cryptocurrency-exposed stocks are extending Wednesday’s sharp gains today, with Bitcoin (^BTCUSD) up more than +3% at a 2.5-month high.  MARA Holdings (MARA) is up more than +8%, and Coinbase Global (COIN) is up more than +6%.  Also, Galaxy Digital Holdings (GLXY) is up more than +5%, and Riot Platforms (RIOT) and Circle Internet Group (CRCL) are up more than +4%.  In addition, Strategy (MSTR) is up more than +4% to lead gainers in the Nasdaq 100. 

Energy producers and service providers are moving higher today, with WTI crude oil up more than +2% at a 1-month high.  ConocoPhillips (COP) is up more than +3%, and APA Corp (APA), Diamondback Energy (FANG), Occidental Petroleum (OXY), Devon Energy (DVN), Halliburton (HAL), and ExxonMobil Holdings (XOM) are up more than +2%.  Also, Chevron (CVX), Marathon Petroleum (MPC), Phillips 66 (PSX), and SLB Ltd (SLB) are up more than +1%.

Advance Auto Parts (AAP) is down more than -22% after reporting Q2 comparable sales unexpectedly fell -0.5% y/y, weaker than expectations of a +1.31% y/y increase. 

Moderna (MRNA) is down more than -19% today to lead losers in the S&P 500 as it gives back some of Wednesday’s +175% surge.

Wolfspeed (WOLF) is down more than -12% after reporting Q4 GAAP gross margin down -25% y/y and that it expects Q1 adjusted gross margin to remain negative. 

Walmart (WMT) is down more than -9% to lead losers in the Dow Jones Industrials and Nasdaq 100 after reporting Q2 US-only store sales rose +2.60%, weaker than the consensus of +3.67%, and forecast 2027 adjusted EPS of $2.80 to $2.87, below the consensus of $2.90.

Deere & Co (DE) is up more than +7% to lead gainers in the S&P 500 after reporting Q3 net income of $1.38 billion, better than the consensus of $1.27 billion, and raising its full-year net income estimate to $4.75 billion to $5.00 billion from a previous estimate of $4.50 billion to $5.00 billion. 

Nordson (NDSN) is up more than +6% after reporting Q3 sales of $817.7 million, stronger than the consensus of $779.6 million, and raising its full-year adjusted EPS forecast to $11.80 to $12.00 from $11.30 to $11.80, above the consensus of $11.60. 

Etsy (ETSY) is up more than +1% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $105. 

Ethan Allen Interiors (ETD) is up more than +1% after declaring a $3-per-share special dividend and reaffirming its debt-free financial position.

Earnings Reports (8/20/2026)

Deere & Co (DE), Ross Stores Inc (ROST), Walmart Inc (WMT).