Dow Jones falls 270 points as bond yields rise on Brent crossing $90 again

Benchmark indices on Wall Street began the new trading week on the back foot as oil prices rose, taking the bond yields to multi-year highs yet again.

The Dow Jones ended with losses of 270 points on Monday, August 17, while the S&P 500 fell 0.5%. The Nasdaq Composite ended 0.3% lower, reversing a earlier gain. The Philadelphia Semiconductor Index was the only outlier, outperforming in an otherwise weak market, ending with gains of 1.6% led by gains in Micron, SK Hynix-ADRs and Intel.

Crude oil prices surged past $90 a barrel on Monday after US President Donald Trump said that he is not interested in extending the MoU timeline with Iran and also threatened to bomb Oman if it got in the way of their war with Iran.

Trump’s statements were echoed by US Energy Secretary Chris Wright, who said that the US is playing a “long game” with Iran. Trump also reiterated that US is the one that controls the Strait of Hormuz due to the Naval blockade, and compared Iran to a “dying poker player” who is playing its cards well by pretending to show strength but is facing pressure from within.

The rise in crude oil prices also triggered a rebound in the bond markets, with the 30-year yield rising to 5.31%, the highest level since 2007, while the 10-year yield rising to 4.73% on Monday. The 10-year bond auction was recently conducted at the highest financing cost since 2007.

Not just the US, 30-year bond yields in Canada also rose to the highest level since 2010, while those in Germany surged to the highest since 2010.

US markets also do not have significant directional triggers this week, barring the release of Fed meeting minutes, and result reports from retailers such as Home Depot, Target, and the largest of them all, Walmart.Analysts continue to maintain that the rise in oil prices, bond yields, lack of progress between the US and Iran and developments in West Asia continue to remain risk factors.