The 10-year Treasury yield touched 5.014% Monday, its highest since October 2023, then closed at 4.987%. A 5% handle on that note has appeared in only two windows since 2007, and the Fed opens a two-day meeting inside the second one.
Stocks closed lower with the chip complex leading the way down. The S&P 500 fell 0.48% to 7,619.98, the Nasdaq Composite lost 0.56% to 26,186.41, and the Dow shed 152.09 points to 52,421.20.
The selling followed Dario Amodei's weekend essay urging a slower pace of AI development, endorsed by Sam Altman and Elon Musk. Nvidia fell 3.26%, and Bloomberg put a semiconductor gauge down 5.9%, a move far larger than anything in the headline indexes.
Salesforce rose 4.73% and Alphabet gained 2.15%, so the damage stayed inside the AI hardware trade. With the long end near 5%, futures point lower again this morning.
WTI for October settled at $101.39, up 1.34%, after trading as high as $104.95, per Investrade. Brent ended at $105.68 after touching $109.80.
Saudi Arabia's East-West pipeline remained shut, and Reuters industry sources put repairs at five to six weeks. The front-month WTI spread widened to $4.44 in backwardation, against less than $1 a month ago.
That spread, not the flat price, is the inflation input behind the move in yields. It tightens further if the pipeline timeline slips.
The 2-year yield rose about a basis point to 4.658%, after touching its highest since July 2024 last week. The 30-year eased to 5.353%.
Fed funds futures price in a 92% chance of a quarter-point hike Wednesday. That would lift the target range from 3.5% to 3.75% and mark the first increase since July 2023.
December gold fell $57.00 to settle at $4,351.90, down 1.29%, and December silver lost 1.61% to $64.14. The metals sold off on a day when a Saudi pipeline was still burning.
The dollar advanced and real yields stayed elevated, which raises the cost of holding gold. The war premium is going into crude, not into the metals.
Today is thin on data. The September Empire State Manufacturing Survey arrives at 8:30 a.m. ET, with consensus at 14.1 against 20.6 in August.
The FOMC begins its two-day meeting, with the decision, the Summary of Economic Projections, and Kevin Warsh's press conference due Wednesday at 2:00 and 2:30 p.m. ET.
The 10-year reached 5.041% early Tuesday, its highest since 2007, per CNBC. S&P 500 futures were down 0.3% and Dow futures were off 229 points.
