The US dollar strengthened against every major currency on Thursday, while Treasury yields rose across the curve, with the 10-year yield approaching 5.19%. Reports that the United States and Iran were discussing a phased reopening of the Strait of Hormuz and an end to the US blockade briefly helped US equities and crude oil move off their intraday lows. No formal agreement has emerged, however, and oil later recovered part of its decline, showing that traders remain cautious about the timing and scale of any supply restoration.
Dollar Gains as Longer-Dated Treasury Yields Climb
The dollar posted its strongest gains against the yen, Swiss franc and Australian dollar, while its advance against the euro was more limited. Treasury yields ended near their session highs. The two-year yield rose 2.1 basis points to 4.916%, the five-year yield gained 4.5 basis points to 5.050%, and the 10-year yield increased 7.6 basis points to 5.1915%. The 30-year yield also rose 7.6 basis points to 5.4782%.
The larger increase in longer-dated yields than in short-term rates put inflation and borrowing costs back at the center of market attention. Philadelphia Fed President Anna Paulson said the Federal Reserve might still need to raise interest rates again to bring inflation down. Cleveland Fed President Beth Hammack also said inflation risks were tilted to the upside. The Fed has not decided whether another rate increase is necessary, but officials' comments have made it difficult for the bond market to fully rule out that possibility.
A $44 billion auction of seven-year Treasury notes by the US Treasury did little to ease pressure on yields. The notes priced at a high yield of 5.085%, 0.7 basis point above the pre-auction indication. That result suggested investors demanded a slightly higher return than the market had anticipated.
US Indexes Finish Near Flat as Stocks Diverge
The main US indexes rebounded from their intraday lows but finished mixed. The Dow Jones Industrial Average fell 162.02 points, or 0.31%, to 51,355.15. The S&P 500 slipped 1.80 points, or 0.02%, to 7,704.22, while the Nasdaq Composite gained 3.34 points, or 0.01%, to 26,939.37. The Russell 2000 declined 0.11% to 2,835.58, and the Nasdaq 100 rose 0.03% to 30,478.86.
The nearly flat index performance concealed wider moves among individual stocks. Meta rose 4.50% and Nebius gained 7.44%, while Intel, CoreWeave and AMD also closed higher. Arm, by contrast, fell 7.88%, while Sandisk and Coherent each lost more than 3%. Semiconductor and artificial-intelligence shares moved in different directions, with no consistent risk appetite across the technology sector.
European Shares Close Lower Across the Board
Major European equity indexes all finished lower. Germany's DAX fell 0.57% to 25,266.54, France's CAC 40 declined 0.52% to 8,081.44, and the UK's FTSE 100 dropped 0.24% to 10,680.00. Spain's IBEX 35 lost 0.30% to 19,573.39, while Italy's FTSE MIB fell 0.85% to 51,543.44.
European 10-year government bond yields moved in different directions but remained near multi-year highs. Germany's yield rose 2.9 basis points, while yields in the UK and Italy edged lower. Elevated borrowing costs continued to limit the ability of European and US stocks to sustain a prolonged rebound, particularly as markets contend with both inflation risks and uncertainty over energy supplies.
US Data Points to Resilient Economic Activity
Initial US jobless claims came in at 197,000, below the market expectation of 201,000. August new-home sales were reported at an annualized rate of 684,000, above the forecast of 615,000. New-home sales figures are subject to significant estimation errors, however, so the monthly result will need to be assessed alongside subsequent revisions.
The employment and housing data did not weaken the market's view that the US economy remains resilient. Combined with Federal Reserve officials' comments on inflation risks, the figures left investors weighing whether the economy can withstand a longer period of high interest rates and when higher Treasury yields could place more visible pressure on corporate financing and equity valuations.
US and Chinese leaders met at the White House, and their public comments were broadly cordial. Markets are still waiting for concrete progress on trade, technology and rare-earth supplies. Those issues had not yet produced a specific policy outcome capable of materially changing asset prices during Thursday's session.
Hormuz Reports Send Oil Lower Before a Partial Recovery
WTI crude briefly fell from about $96.78 a barrel to $93.30 as markets absorbed reports of a possible phased arrangement between the United States and Iran. It later recovered most of the decline. A closing snapshot put WTI at about $95.11 a barrel, up $2.41, or 2.60%.
Discussions over reopening the Strait of Hormuz offer a potential route toward restoring energy shipments, but they do not amount to an agreement. Iranian comments about the prospects for reopening the strait have also varied. Traders therefore remain focused on whether concrete shipping arrangements emerge, whether the blockade changes and how any supply recovery would be implemented. Until those details become clearer, crude prices are likely to remain highly responsive to diplomatic developments and transport risks.
Gold, Silver and Bitcoin Remain Under Pressure
Gold traded at about $4,274 an ounce, down $12.85, or 0.30%. Silver was around $63.79 an ounce, down $0.65, or 1.00%. A stronger dollar and higher US Treasury yields pressured precious metals at the same time: higher bond yields increased the return available from fixed income, while dollar-priced metals became more expensive for buyers using other currencies.
Bitcoin was around $84,378 after declining earlier in the session and then trading broadly flat. It did not clearly follow the late rebound in US stocks, indicating that the connection between equities and crypto assets was limited on the day. A single session's close is not enough to establish whether the relationship between the two asset classes has changed on a lasting basis.
In the next trading session, markets will continue to assess whether US-Iran communications can produce workable shipping arrangements, whether crude can remain near elevated levels and how much further increases in Treasury yields could weigh on equities. Thursday's rebound from the lows showed that buyers remained active, but the stronger dollar, rising bond yields and sharp dispersion among individual stocks pointed to an uneven foundation for the recovery.