U.S. stocks were mixed in early trading on Thursday, with the S&P 500 index down 0.2%. Oil prices and U.S. Treasury yields moved higher concurrently. Traders continued to assess NVIDIA's earnings report and developments concerning the U.S.-Iran situation. Mounting inflationary pressures have increased expectations for Federal Reserve interest rate hikes.
The Dow Jones Industrial Average rose 3.99 points, or 0.01%, to 50,013.34. The Nasdaq Composite fell 88.35 points, or 0.34%, to 26,182.00. The S&P 500 index declined 16.15 points, or 0.22%, to 7,416.82.
It was reported that Iran's Supreme Leader has ordered the country's enriched uranium to be retained domestically, complicating the prospects for resolving the U.S.-Iran conflict, after which oil prices surged. In early Thursday trading, West Texas Intermediate crude futures rose 2.9% to $101.04 per barrel. Brent crude increased 2.3% to $107.36.
As oil prices soared, U.S. Treasury yields also climbed, driven by traders' heightened concerns about rising inflation. The benchmark 10-year U.S. Treasury yield rose 5 basis points to 4.615%. The 30-year Treasury yield increased 3 basis points to 3.665%.
On Wednesday, stocks rebounded as oil prices and bond yields retreated, ending a three-day losing streak for the S&P 500. Investor sentiment received a temporary boost after the U.S. administration indicated that negotiations with Iran had entered a "final phase."
Scott Helfstein, Head of Investment Strategy at Global X ETFs, stated, "The market just experienced a very strong earnings season, with profit expectations being revised upward, but concerns about inflation and shrinking economic demand persist. This may be hard to ignore, yet there are still many positive trends that could help drive the economy and markets."
Traders on Thursday continued to evaluate NVIDIA's latest quarterly report. NVIDIA comfortably exceeded Wall Street's expectations for its earnings and guidance and also announced an increase in its quarterly cash dividend to 25 cents per share. However, within the artificial intelligence boom, investors have grown accustomed to the chipmaker surpassing expectations and raising its outlook.
NVIDIA's stock price saw a slight decline in after-hours trading.
Expectations for Federal Reserve rate hikes are intensifying. With little sign of a near-term resolution to the Middle East conflict, traders are currently betting there is a 70% probability of a 25-basis-point Fed rate hike by December, while a 25-basis-point hike by next March is almost seen as a foregone conclusion. Swaps market pricing shows this contrasts sharply with pre-conflict expectations for more than two 25-basis-point rate cuts by year-end.
JPMorgan Chase CEO Jamie Dimon commented, "The U.S. government debt stands at $30 trillion, with an average interest rate of 3.5%. Even today, they simply cannot refinance at a rate below that level. They have $2 trillion to handle this year, but the issue is, we don't know when — we don't know when the world will start to become overly fearful of this, or when inflation will make people unwilling to hold long-duration securities."
He added that this impact would also ripple through credit markets: "It's entirely possible for interest rates to rise further, and credit spreads could continue to widen. At some point, many will have to refinance at higher rates."
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