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US stocks ended lower on Thursday, with the Dow Jones Industrial Average falling for a third straight session as Treasury yields reached multidecade highs and higher oil prices added to inflation concerns.
The Dow fell 162.41 points, or 0.32%, to 51,349.18.
The S&P 500 slipped 0.03%, while the Nasdaq Composite gained 0.01%.
Stocks recovered from their session lows after reports that US and Iranian negotiators were exploring a phased agreement that could see Tehran reopen the Strait of Hormuz and Washington lift its economic blockade on Iran.
However, elevated oil prices and Treasury yields continued to weigh on sentiment.
Treasury yields reach multidecade highs
Treasury yields climbed sharply on Thursday, with the 30-year Treasury yield touching 5.491%, its highest level since June 2004.
The 10-year Treasury yield also surged to 5.21%, approaching levels last seen in July 2007.
The 2-year yield was little changed on the day after reaching a 2023 high earlier in the week.
Higher yields can increase borrowing costs for consumers and companies while making government bonds relatively more attractive compared with riskier assets such as equities.
The rise in yields also reflected growing expectations for another Federal Reserve interest-rate increase. Fed funds futures indicated a nearly 71% probability of an October rate hike, up from roughly 55% a week earlier.
The expectations followed stronger US business activity data released Wednesday, with S&P Global manufacturing and services purchasing managers’ indexes indicating continued economic strength.
New York Fed President John Williams also said Thursday that another rate increase before the end of the year was a reasonable possibility.
Oil prices rise as Hormuz risks persist
Oil prices climbed as concerns over potential supply disruptions returned following a Houthi missile attack on Saudi Arabia.
Brent crude gained more than 4% to close above $107 a barrel, while West Texas Intermediate crude rose by 3% to settle around $95.
Both benchmarks had gained about 5% earlier in the session before reports of the US-Iran discussions helped reduce the advance.
The Strait of Hormuz remains a key focus for energy markets because the proposed phased agreement could restore shipping through the major oil route.
AI stocks mixed as Oracle falls
AI-related stocks were mixed during the session.
Microsoft and Broadcom declined, while Advanced Micro Devices gained.
Meta Platforms rose after the company unveiled a handheld device linked to its recently launched AI assistant.
Oracle was among the biggest decliners, falling more than 3% after a report said the company had issued a force majeure notice related to a data-centre project in New Mexico.
Blue Owl, the project’s developer, also fell sharply.
MGM Resorts declined after media executive Barry Diller’s People Inc withdrew its proposal to acquire the casino operator.
Meanwhile, the S&P 500 traded at just under 19 times expected earnings during the week, its lowest valuation since 2023, according to LSEG data.
AI-related companies have accounted for much of the recent rise in earnings expectations.
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