• U.S. equities retreated on Thursday, with the Nasdaq Composite shedding 1.00% intraday, as a surge in oil prices and elevated Treasury yields rekindled inflation fears.
  • Technology and semiconductor shares bore the brunt of the selling, though declines were broad-based, with eight of the S&P 500’s 11 sectors lower.
  • Market participants are closely watching upcoming earnings and inflation data for clues on the Fed’s next move, with some suggesting a pause is possible.

A Broad Retreat

U.S. stocks fell on Thursday, extending losses as a sharp rise in oil prices and stubbornly high bond yields revived concerns about persistent inflation. The Nasdaq Composite was down 1.00% intraday, according to the latest available data, while the S&P 500 also traded lower. The move came as Brent crude futures jumped 4.2% to above $104 a barrel amid escalating tensions in the Middle East and attacks on shipping in the Gulf and Strait of Hormuz.

The benchmark 10-year Treasury yield stood at 5.29%, near its highest level since 2002, adding pressure on equity valuations and corporate financing costs. "The combination of rising energy costs and elevated yields is a double whammy for stocks," said one market strategist, who requested anonymity to speak freely. "Investors are reassessing the inflation trajectory and what it means for monetary policy."

Selling was widespread, with eight of the S&P 500’s 11 sectors in the red during morning trading. Technology and healthcare led the declines, while energy and consumer staples gained approximately 2% and 1%, respectively. Declining stocks outnumbered advancers on the Nasdaq by 2.53 to 1.

Tech and Semis Under Pressure

Semiconductor shares were particularly weak. Marvell Technology (MRVL) and Intel (INTC) each fell roughly 3%, while Advanced Micro Devices (AMD) slid 2% and Micron Technology (MU) lost 1.4%. Mega-cap tech names also traded lower: Amazon (AMZN), Tesla (TSLA), and Nvidia (NVDA) were down between 0.3% and 1.3%. These moves reflect intraday levels and may change by the close.

The pressure on technology stems from both rising rates, which reduce the present value of future earnings, and growing scrutiny over the massive investments in artificial intelligence. "Investors are starting to question whether the enormous AI capex will generate sufficient returns," noted a portfolio manager at a large asset manager. "Any disappointment could trigger a sharp repricing."

Fed in Focus

The Federal Reserve remains a key driver of market sentiment. On Thursday, Governor Christopher Waller suggested the central bank could pause at its upcoming meeting while retaining flexibility to raise rates further if needed to bring inflation back to its 2% target. Traders broadly expect the Fed to hold steady at its October meeting, with a December increase still possible.

The minutes from the September meeting showed disagreement among officials about whether the recent rate hike primarily addressed energy-price shocks or demand-driven inflation. September CPI data, due on October 14, will be closely watched ahead of the Fed’s October 28 decision.

Oil and Geopolitics

The surge in oil prices follows heightened geopolitical risk in the Middle East. Supply concerns persist despite an International Energy Agency agreement to accelerate releases of oil stocks, which helped stocks pare losses on Wednesday. Renewed gains on Thursday suggest the market remains uneasy about potential supply disruptions.

Higher energy prices threaten to keep inflation elevated, complicating the Fed’s path. They also squeeze consumers and businesses, as evidenced by recent data: mortgage rates have reached a near-three-year high, and homebuilder stocks have slumped. On Wednesday, the Russell 2000 fell 1.3%, while housing-related stocks slipped 2.3%.

Earnings on Deck

Next week marks the start of the third-quarter earnings season, with major banks including JPMorgan Chase (JPM) set to report. Analysts expect aggregate S&P 500 earnings growth of 30.6% year over year, according to LSEG (LSEG.L) estimates, with technology and energy leading. However, strong results may not be enough to offset macro headwinds.

"Earnings will be crucial, but so will guidance," said Art Hogan, chief market strategist at B. Riley Wealth (RILY). "Companies that can demonstrate pricing power and resilience in this environment will be rewarded."

Related Developments

  • Broadcom (AVGO) is reportedly arranging $50 billion in financing for OpenAI, according to a Wall Street Journal (NWSA) report cited by Reuters (TRI), fueling concerns about capital demand and debt issuance. The transaction has not been confirmed.
  • Samsung (005930.KS) forecast record quarterly profit, but its shares fell, illustrating that company-specific news is being overshadowed by macro factors.
  • Wolfspeed (WOLF) rose 9.6% after receiving a $1.5 billion conditional loan commitment from the U.S. Department of Defense, bucking the semiconductor selloff.
  • PepsiCo (PEP) shares gained 2.1% despite cutting its annual core-profit forecast and announcing spending reductions, showing that individual stock reactions can diverge from the broader market.

Outlook

In the near term, oil prices, Treasury yields, and inflation data will dictate market direction. "If yields and oil stabilize, we could see a relief rally," said Nathan Peterson, a strategist at Charles Schwab (SCHW). "But if they continue to climb, stocks will remain under pressure."

Longer term, the path depends on whether earnings can sustain the market’s elevated valuations amid tighter financial conditions. For now, investors are treading cautiously.

Correction: An earlier version of this article misstated the intraday decline of the Nasdaq. It was down 1.00%, not 1.5%.