U.S. stocks edge higher as oil slips and chips rally, but rising Treasury yields cap gains
U.S. stock indexes traded higher on Wednesday, with the S&P 500 up 0.25%, the Dow Jones Industrial Average up 0.36%, and the Nasdaq 100 higher by 0.30%. Futures on the S&P 500 and Nasdaq 100 also moved up, supported by a sharp decline in crude oil and strength in semiconductor and artificial intelligence-related shares, even as bond yields climbed.
Market direction appeared to hinge on two competing forces: improved U.S. data supporting risk assets and hawkish signals from the Federal Reserve pushing rates higher, which in turn pressured equities from the morning highs.
Key takeaways
- Price move: The S&P 500 gained 0.25%, the Dow rose 0.36%, and the Nasdaq 100 was up 0.30%.
- Catalyst: WTI crude fell more than 1% on reports that the U.S. and Iran are exploring a phased approach to reopen the Strait of Hormuz, while chip and AI stocks strengthened.
- Rates influence: The 10-year Treasury yield climbed to a new 19-year high near 5.23%, pressuring stocks after earlier gains.
- Economic backdrop: Stronger-than-expected capital goods orders and an upward revision to consumer sentiment helped support the equity tape.
- What it implies: Investors are balancing softer energy-related inflation pressure against tighter financial conditions from higher yields.
What drove the move
Crude oil weakness provided early support for equities. WTI fell more than 1% after a report said U.S. and Iranian negotiators were exploring a phased deal to reopen the Strait of Hormuz. The Financial Times reported that Iran’s foreign minister submitted a new seven-day proposal to the U.S. tied to conditions for reopening the strait.
Equities also benefited from strength in technology and AI-adjacent stocks. Chipmakers and AI-related names rose broadly, lifting the broader market. Data points included the iShares Semiconductor ETF rising more than 1% and several large semiconductor and networking-related shares gaining more than 2% to 3%.
On the economic calendar, U.S. data came in better than expected. According to the reported figures, August nondefense ex-aircraft capital goods new orders—used as a proxy for capital spending—rose 1.6% month over month, outperforming expectations of 0.6%. July was also revised higher. Separately, the University of Michigan’s September consumer sentiment index was revised upward by 0.3 to 48.1 versus expectations of a downward revision.
Market reaction: stocks up, Treasuries slide
Despite the positive start, stocks pared gains as bond yields rose. The 10-year Treasury yield climbed to a new 19-year high around 5.23%, and December 10-year Treasury futures were lower on the session. Traders pointed to hawkish commentary from New York Fed President John Williams, who said the Fed can’t ignore supply shocks if they have persistent effects on prices and needs to bring inflation back to target.
As yields moved higher, equities that tend to be more sensitive to discount rates—often including high-duration growth stocks—faced pressure, contributing to the move off intraday highs.
Oil’s decline appeared to offer some offset at the open, with market participants initially linking cheaper crude to easing inflation expectations. However, the stronger U.S. economic print and the Fed remarks were ultimately stronger drivers for rates, according to the day’s market commentary.
Sector and company highlights
Semiconductors and AI-related stocks led higher. The move lifted multiple chip and equipment names. The day’s gainers included ARM, NXP Semiconductors, Qualcomm, Microchip Technology, Analog Devices, and Texas Instruments, alongside strength in other infrastructure-related names.
Cybersecurity names fell. Zscaler dropped after announcing Ross Tackett as its new chief revenue officer effective October 1. Other cybersecurity stocks also declined, including Okta and SentinelOne, while Palo Alto Networks, Fortinet, and Gen Digital were lower.
Energy and oil-linked shares were weaker. With WTI down more than 1%, energy stocks broadly fell. Valero Energy and Devon Energy declined more than 2%, while several other oil producers and refiners also traded lower.
Corporate news drove select single-stock moves. Atlas Energy Solutions rose more than 19% after announcing a purchase agreement with Wyoming Machinery Company for $340.5 million of balance-of-plant equipment for a power generation project. People Inc. rose more than 9% after the Wall Street Journal reported MGM Resorts is discussing a bid. Humana gained more than 8% after Barclays upgraded the stock to overweight from equal weight. Akamai Technologies climbed more than 7% following an agreement to provide computing power to Anthropic. On the downside, Twilio fell more than 6% after HSBC downgraded it, while Lionsgate Studios declined after JPMorgan started coverage with an underweight stance. Comcast fell after KeyBanc downgraded the stock to underweight from sector weight.
Bigger picture: what to watch next
With yields hovering near multi-year extremes and oil sentiment sensitive to geopolitical developments in the Middle East, investors are likely to stay focused on the interaction between the inflation outlook and Fed policy expectations. Trading next may turn on further comments from central bankers, additional macro data releases, and shifts in market pricing for upcoming central bank meetings.
