U.S. stocks are sinking Friday as hopes wither on Wall Street for a possible cut to interest rates by the Federal Reserve this year.
The S&P 500 fell 0.7% in morning trading and was on track for a fourth straight losing week, its longest such streak in a year. The Dow Jones Industrial Average was down 136 points, or 0.3%, as of 10 a.m. Eastern time, and the Nasdaq composite was 1.2% lower.
U.S. stocks sank under the weight of another rise for yields in the bond market. That makes borrowing more expensive for U.S. companies and households, slowing the economy, and it grinds down on prices for all kinds of investments. Treasury yields have been climbing since the war with Iran began because it could cause a long-term spike in oil and natural gas prices that drives up inflation.
Worries have gotten so high that traders have cancelled most bets that the Federal Reserve could cut interest rates multiple times this year, or even jut once, according to data from CME Group. Some see a modest chance for a rate hike in 2026, which was a nearly unthinkable scenario before the war began.
Lower interest rates would give the economy and investment prices a boost, and they’re something President Donald Trump has angrily been calling for. Before attacks by the United States and Israel began the war with Iran, traders were betting heavily that the Fed would cut interest rates at least twice this year.
But lower rates also risk worsening inflation. And with oil prices so much higher now, investors see little room for central banks worldwide to cut interest rates to help their economies. Besides the Federal Reserve, central banks in Europe, Tokyo and London also held their interest rates steady this past week.
Friday’s worries came even as oil prices calmed a bit. A barrel of Brent crude, the international standard, added 0.2% to US$108.84 after earlier drifting lower. Benchmark U.S. crude inched up less than 0.1% to US$95.61 per barrel.
The price of Brent has zigzagged sharply on its way there from roughly US$70 per barrel before the war began. Big swings up and down have struck hour to hour as financial markets try to handicap how long the war will last and how much damage it will do to oil and gas production in the Persian Gulf.
Much of the focus is on the Strait of Hormuz, a narrow waterway off Iran’s coast. A fifth of the world’s oil typically sails through it, but Iran has effectively closed it to its enemies.
On Wall Street, Super Micro Computer dropped 27% and helped drag the U.S. stock market lower. The U.S. government accused a senior vice president of the company and two others affiliated with it of conspiring to smuggle billions of dollars of computer servers containing advanced Nvidia chips to China.
The company said it’s cooperated with the investigation and is not a defendant in the indictment. It placed its two accused employees on administrative leave and terminated its relationship with an accused contractor.
On the winning side of Wall Street was FedEx, which rose 2.1% after delivering much stronger profit for the latest quarter than analysts expected.
In the bond market, the yield on the 10-year Treasury jumped to 4.35% from 4.25% late Thursday and from just 3.97% before the war started.
Outside of Wall Street, indexes dipped modestly in Europe following their wipeouts on Thursday. South Korea’s market added 0.3%, but Chinese indexes fell more sharply.
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Chan Ho-him and Matt Ott contributed.