S&P 500 and Nasdaq Retreat as Treasury Yields Hit Multi-Month Highs

Stocks retreated Friday morning, pulling back from record highs. After the Dow Jones Industrial Average (^DJI 1.07%) cracked 50,000 and the S&P 500 (^GSPC 1.24%) eclipsed 7,500 for the first time on Thursday, Wall Street decided Friday morning was a good time for a breather. The tech-heavy Nasdaq-100 index reversed course just before reaching the 30,000 milestone.

As of 1 p.m. ET, the Nasdaq-100 was down 1.2%, the S&P 500 had slipped 0.9%, and the Dow was off by 0.8%.

^NDX data by YCharts

On the upside, this week looks pretty calm if you zoom out a bit. All three indexes are basically flat over the past five trading days. They dipped on Tuesday, bounced back, hit records Thursday, and are now giving some of that back. Standard stuff, but for dramatic reasons.

Yields, oil, and a disappointing summit

Let’s start with bonds, because that’s where the trouble is brewing. The 10-year Treasury yield jumped to 4.6%, its highest level in months. The 30-year topped 5.1%. When yields rise, growth stocks tend to suffer, and that’s exactly what happened this morning.

Investors don’t like turmoil at the Federal Reserve, where longtime Chairman Jerome Powell is handing the reins to Kevin Warsh. At the same time, President Trump is returning from a low-impact state visit to China. The Street was hoping for fireworks. The American squad involved more than a dozen high-powered business leaders, hoping (mostly in vain) for new opportunities in China.

Oil prices added to inflationary concerns. Several oil types rose about 3% today, while average gas prices held steady around $4.53 per gallon. Only six ships passed through in the past 24 hours, down from a daily average of 120 three months ago.

Only a handful of heavyweight stocks moved the needle on the major indexes. Nvidia (NVDA 4.39%) led the S&P 500 and Nasdaq-100 retreats with a 3% price drop. Earlier this week, American regulators greenlighted the company’s plan to sell some older AI accelerator chips in the Chinese market. Today, the Chinese government is blocking that potential trade for a trade policy review. Beijing may prefer powering Chinese AI systems with Chinese chip designs.

Microsoft (MSFT +3.04%) bucked the trend, rising 3.6% after Bill Ackman revealed Pershing Square had taken a stake. Caterpillar fell 3.7%, making it the Dow’s biggest loser on tariff concerns.

Stepping back from the noise

One week (or a single day) of market noise doesn’t define Wall Street’s long-term prospects, of course. The indexes are still close to records, arguably for good reason. The AI boom has added trillions of dollars of extra value to the cap-weighted indexes in recent years. The political tension and macroeconomic stress won’t last forever. All told, the gains should continue — perhaps with a few potholes and speed bumps along the road.

For long-term investors, days like Friday are noise within a broader trend. The question is whether that trend can continue with oil above $100, 10-year yields approaching 4.6%, and the Strait of Hormuz effectively closed.

Only time will tell. Stay tuned for further updates.