Bond rout deepens as oil holds above $90, pressuring chip stocks

A deepening global bond rout and crude above $90 a barrel are testing a stock market that just set its 27th record close of 2026.

U.S. equity futures slipped Monday as a global bond selloff and crude oil holding above $90 a barrel dragged Micron Technology and Applied Materials down more than 3% in premarket trading.

"The 10-year yield has remained uncomfortably high as sporadic flare-ups in kinetic activity and unanswered questions around energy production and shipping disruptions in the Middle East have led markets to increase their expectations of a Federal Reserve rate hike," Jeff Buchbinder, chief equity strategist at LPL Financial, said.

The 10-year Treasury yield traded near 4.66% after the U.S. sold 30-year debt at its highest borrowing cost since 2001, while Brent crude held above $90 a barrel on Middle East supply risks. The S&P 500 closed at 7,798.99 on Thursday, up 13.93% year to date, after registering its 27th record high of 2026.

Rising yields pressure equity valuations, especially for growth and technology names whose cash flows stretch furthest into the future, while higher energy costs feed inflation expectations that keep the Federal Reserve from cutting rates. The next catalyst is the University of Michigan consumer survey due Friday, with traders also watching for any diplomatic resolution in the Middle East that could pull crude and yields off recent highs.

Tech Leads the Slide as Yields Test Multi-Year Highs

Buchbinder said the stock market's relationship with bonds is fluid — equities can rise alongside climbing yields when faster growth boosts profits, but when rates climb on debt-supply or inflation fears, elevated borrowing costs begin to dampen risk appetite. He expects the 10-year yield to finish the year between 4.00% and 4.50% once Middle East negotiations ease energy costs.

Materials, real-estate and developed-market stocks have been the most negatively correlated to 10-year yields over the past year, while energy companies and crude futures could outperform if yields break higher. The Russell 2000 small-cap index, the most rate-sensitive corner of the market, faces the heaviest pressure from rising capital costs that impair demand for big-ticket purchases.

Breadth Concerns Linger Beneath Record Highs

The S&P 500's resilience masks a narrow profit boom. Jim Paulsen, a Wall Street veteran and author of the Paulsen Perspectives blog, said only about 122 S&P 500 firms have higher trailing four-week average 12-month forward earnings-per-share estimates, compared with peaks of almost 150 in early 2018 and 163 in 2020.

U.S. retail sales fell 0.6% in July, worse than the 0.1% gain forecast, adding to signs that higher borrowing costs are cooling consumer demand. Gold traded around $4,402 an ounce while the dollar index slipped, and the U.S. is imposing tariffs of up to 100% on imported drones and their components, a fresh headwind for supply chains.

This article is for informational purposes only and does not constitute investment advice.