Stocks tumble as Treasury yields spike and Iran fears shake markets

Wall Street experienced a sharp decline on Friday as investors sold off stocks in response to a significant increase in Treasury yields, a surge in oil prices, and ongoing concerns about the situation in Iran.

The Dow Jones Industrial Average dropped over 500 points during afternoon trading, while the S&P 500 and Nasdaq Composite also saw declines of more than 1% and 1.5%, respectively. This sell-off was driven by traders moving away from high-growth tech companies that had been leading the market to new record highs in recent weeks.

The selling pressure intensified as the 30-year Treasury yield rose above 5.1%, reaching levels not seen in almost two decades and causing unease among investors already worried about inflation and geopolitical tensions.

Oil prices also climbed following President Trump’s warning that he was losing patience with Iran, raising fears of escalating tensions in the Middle East and potential disruptions to the crucial Strait of Hormuz, a major shipping route for oil.

West Texas Intermediate crude surpassed $105 a barrel, while Brent crude traded above $108.

“There are several factors weighing on the market today, and people may be worried about holding positions over the weekend,” said Derek Reisfield, co-founder and original chairman of MarketWatch, in an interview with The Post.

“One concern is that any US action on Iran may have been put on hold until after President Trump’s summit with China was concluded,” he added.

“So traders are left wondering if the US will resume military action.”

Investors had hoped that Trump’s meetings with Chinese President Xi Jinping would lead to progress in resolving issues related to the Strait of Hormuz or easing tensions in the region. However, the outcome left markets grappling with the possibility of prolonged energy disruptions and rising inflation pressures.

“With the closure of the Strait of Hormuz, there is a halt in the supply of oil, gas, and other essential economic inputs, which will contribute to higher prices across the economy,” Reisfield explained.

The spike in borrowing costs added to the market pressure, with the 10-year Treasury yield surpassing 4.5% and the 30-year yield surging past 5%. This raised concerns that persistent inflation could lead to higher interest rates, impacting overvalued stocks.

“The cost of borrowing is increasing, making it more expensive to own assets, which in turn lowers prices,” Reisfield noted.

Friday’s losses were particularly pronounced in technology and semiconductor stocks after a strong rally driven by optimism about artificial intelligence. Intel fell 5%, AMD dropped 3%, Micron lost 4%, and Nvidia slipped 2%. Cerebras Systems, which had a successful Nasdaq debut, also saw a decline of 4%.

Cryptocurrency-related companies were also affected, with Bitcoin falling below $80,000. Coinbase and Strategy both experienced declines of 8% and 6%, respectively.

These concerns were further exacerbated by higher-than-expected inflation data earlier in the week, prompting traders to reconsider the Federal Reserve’s stance on interest rates. The market now anticipates the possibility of another rate hike rather than a cut as the Fed’s next move.

Despite the general decline, Microsoft stood out as a winner on Friday, rising by approximately 4% after billionaire hedge fund manager Bill Ackman revealed a stake in the software giant through Pershing Square.

However, the overarching sentiment on Wall Street remained cautious as investors evaluated whether stocks at record highs could withstand challenges like rising yields, expensive energy, and escalating geopolitical risks simultaneously.

“Investors are paying attention to these signals and feeling anxious,” Reisfield stated.

“The dilemma they face is whether to hold onto their positions at these elevated market levels or take some profits off the table.

“Many are opting to sell some and feel more secure,” he added.

Reflecting on the current market environment, Reisfield recalled an old lesson from Wall Street about securing gains before the market shifts unfavorably.

“There’s a great quote from a member of the Rothschild family who was asked how he made so much money,” he shared.

“And he replied, ‘I always sold too soon.'”