NEW YORK
The 10-year Treasury yield spiked 8 basis points to 4.91 percent Thursday, its highest level since 2023, as a combination of crude price strength and hotter-than-expected producer inflation reset expectations for Federal Reserve policy ahead of next week's FOMC meeting.
West Texas Intermediate crude oil surged 6.8 percent to above $100 per barrel, with Brent also climbing past the psychological level. The move rekindled inflation concerns that markets had begun to price out.
August producer prices rose 5.4 percent year-over-year, exceeding consensus and pulling forward rate hike speculation that had receded in recent weeks. The combination of crude pressure and PPI surprise compressed long-end yields and pushed real rates higher across the curve.
Equity markets reflected the shift. The S&P 500 extended losses to a fourth consecutive day, with the Nasdaq taking the largest hit as semiconductor weakness in Intel and Micron dragged on the index. Defensive sectors dominated, with Communication Services up 0.66 percent while Financials fell 0.23 percent and Energy dropped 0.38 percent despite crude gains—a signal that investors viewed the oil move as inflation risk rather than sector tailwind.
Housing data added to the headwind. Existing home sales fell 2 percent to a 3.98 million annual pace as mortgage rates remained near 7 percent, keeping buyers sidelined.
Corporate earnings sent mixed signals. Oracle jumped after hours on 121 percent cloud infrastructure revenue growth and $664 billion in remaining performance obligations, including over $30 billion from new AI cloud contracts. Total revenue grew 30 percent to $19.34 billion, with adjusted earnings per share at $1.92 against an expected $1.74. Cloud revenue surged 62 percent, and the company reaffirmed a $90 billion to $95 billion capital spending plan for AI infrastructure.
Adobe fell after hours despite beating estimates on 13 percent revenue growth to $6.76 billion and adjusted EPS of $6.13. The company reported AI-related annual recurring revenue grew over 150 percent, but investors focused on monetization clarity rather than user growth alone.
The Consumer Price Index release will carry outsized weight in determining whether the PPI surprise signals durable inflation persistence or remains an outlier. Bond investors are watching closely for signs of whether the Fed's path remains on hold or shifts back toward restriction.
