U.S. stocks retreat as oil climbs and rate hike bets rise

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US stocks retreat as oil climbs

Highlights

Brent oil exceeds $100 per barrel and WTI climbs 3.1% to nearly $96 as geopolitical tensions disrupt the Strait of Hormuz.
Fed rate hike expectations for next week rise to 62.4% for a 25-basis-point increase, pushing 10-year Treasury yields above 4.8%.
Apple shares fall 0.84% pre-event, Meta gains 4.7% after unveiling Muse AI, and Amazon drops 1.8% following a 4.15 billion sterling bond sale.

Oil surge and rate expectations weigh on markets

Cboe Global Markets reports that fears over higher interest rates and rising crude prices are hitting sentiment in early trading, with investors shifting into more defensive assets. Brent, the global oil benchmark, tops $100 per barrel as tensions between the U.S. and Iran continue to escalate and disrupt shipments through the Strait of Hormuz, while WTI rises 3.1% and nears $96 a barrel.

At the same time, expectations for a 25-basis-point Federal Reserve rate increase to a range of 3.75% to 4.0% next week climb to 62.4%, according to the CME FedWatch tool. The 10-year Treasury yield hovers above 4.8%, a level that could feed through to mortgage costs and add strain to the housing sector.

The three main U.S. equity indices are all lower in early trade. The Dow Jones Industrial Average falls 360 points, or 0.67%, while the S&P 500 declines 0.29% and the Nasdaq Composite drops 0.37%.

Company moves and sector reactions in focus

Investors are also waiting for details on how much the Treasury Department plans to spend on repurchasing long-dated U.S. debt later in the day, with Wall Street expecting $4 billion to $5 billion. The expected amount is notable, but modest relative to the size of the broader Treasury market.

Apple is in focus ahead of its product event, where the company is expected to unveil a foldable iPhone and new Apple Watches under chief executive John Ternus. In early trading, Apple shares are down 0.84%, while Amazon falls 1.8% as investors digest news of a 4.15 billion sterling bond sale in Europe tied to heavy artificial intelligence spending.

In healthcare, Novartis rebounds 1.1% in early trade after dropping 14% on Tuesday following setbacks in late-stage trials for two pipeline treatments. The disappointment also reverberates across the sector, after Amgen fell 10.1% and Eli Lilly lost 2.2% in the previous session; in early trading, Amgen slips 0.35% while Eli Lilly gains 0.85%.

Elsewhere, Meta rises 4.7% after introducing Muse, a personal artificial intelligence agent designed to connect with email, calendars and payments services. GameStop adds 1.5% after reporting in Tuesday earnings that collectibles, rather than video games, remain its largest revenue source.

In our earlier article on rising oil prices and higher bond yields pressuring U.S. equities, we noted that Brent’s push toward the $100-a-barrel mark was weighing on stock sentiment and reviving inflation concerns. We also highlighted how the same backdrop was keeping attention on a potential Federal Reserve rate hike, even as headline tech developments—such as Apple’s iPhone launch and Amazon’s sterling bond sale—drove stock-specific moves.

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