Stocks sold off Thursday as rising bond yields and surging oil prices spooked market participants. Poorly received earnings reports from a pair of Magnificent 7 stocks didn’t help matters, with the main indexes now on track for another week of losses.
At the close, the blue-chip Dow Jones Industrial Average was off 1.0% at 51,711, the broader S&P 500 was 1.2% lower at 7,408, and the tech-heavy Nasdaq Composite was down 2.2% at 25,137.
Rising bond yields were one headwind for stocks today. The yield on the 2-year Treasury jumped 4.9 basis points to 4.351% — its highest level since February 2025. And the 10-year Treasury yield spiked 4.2 basis points to an 18-month high of 4.699%.
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The surge in Treasury yields comes as oil prices climb and accelerate inflation worries. It’s also lifting expectations for a rate hike later this year. Front-month West Texas Intermediate crude futures rose 6.2% to $92.19 per barrel, and are now up 33% month to date.
“Higher oil prices are the biggest near-term macro risk,” says Sameer Samana, head of Global Equities and Real Assets at Wells Fargo Investment Institute (WFII). “Escalating Middle East tensions have pushed crude prices higher, raising concerns that inflation could reaccelerate and delay interest-rate relief … maybe even cause the Fed to hike.”
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And higher Treasury yields, Samana adds, reflect “expectations that rates may stay higher for longer, creating potential headwinds for rate-sensitive sectors and long-duration assets.”
According to CME Group FedWatch, futures traders are pricing in a 57% chance that the Federal Reserve will hike the federal funds rate by a quarter-percentage point in September — and a 26% probability it will raise rates by a half-percentage point.
The odds for a rate hike at next week’s Fed meeting are currently at 36%, up from 12% one week ago.
Alphabet stock has its worst day since May 2025 on capex worries
In single-stock news, Alphabet (GOOGL) slumped 7.1% today, the Dow Jones stock‘s worst day since May 2025, after the Google parent reported earnings.
While Alphabet beat on the top and bottom lines on strong revenue growth in its Cloud, Search and YouTube segments, the company’s increased spending is worrying Wall Street. In its earnings call, management said it is raising its full-year capex budget to a range of $195 billion to $205 billion from $180 billion to $190 billion.
The higher capex, Alphabet admits, will keep pressure on free cash flow — which came in negative for the first time in Q2 — but “enables us to capitalize on the AI opportunity and continue to drive attractive returns.”
Tesla loses $203 billion in market value today
In the company’s earnings call, Tesla’s chief financial officer, Vaibhav Taneja, said capex will rise even further from here.
“CapEx will grow for the next two to three years as we expand our robotaxi fleet, expand our production capacity for Optimus, make investments for semiconductor fab, install solar manufacturing capacity and AI compute infrastructure in addition to all the other expansions we’ll do for other manufacturing for automotive,” Taneja explained.
“TSLA is in the midst of a high investment period so capex efficiency is key with the payoff from these investments further down the road, in our view,” says UBS Global Research analyst Joseph Spak.
