Market Tumbles as Bond Yields Rise, Chip Stocks Slump, and Oil Prices Surge

U.S. stock markets mostly declined on Monday, with the S&P 500 hitting a two-month low as investors adjusted their expectations for Federal Reserve policy. Friday’s strong jobs report reinforced views of a robust economy, prompting concerns that interest rates might remain elevated for an extended period.
Stocks Slide Amid Fed Concerns
At 11 AM ET, the S&P 500 was down 0.43% at 5,802.15, while the Nasdaq dropped 1.04% to 18,961.43. The Dow Jones Industrial Average bucked the trend, gaining 0.42% to reach 42,116.21. Bond yields surged, with the benchmark 10-year Treasury yield climbing to 4.786%.
Economists at Bank of America revised their outlook, predicting the Federal Reserve may lean toward a rate hike rather than cuts. “With inflation still above target and the labor market strong, there is no pressing need for rate cuts,” they noted, adding that risks now appear skewed toward further tightening.
Chip Stocks Under Pressure
Semiconductor stocks suffered steep losses after the Biden administration unveiled new restrictions on AI chip exports. The proposal aims to limit the export of advanced AI chips to certain countries, particularly China, to protect U.S. national security and maintain an edge in artificial intelligence development.
Nvidia, a key player in the semiconductor industry, criticized the move. Ned Finkle, the company’s vice president of government affairs, called the restrictions “misguided” and warned of their potential to stifle global innovation and economic growth. Shares of Nvidia fell 3.77% to $130.79, while Intel dropped 2% to $18.77.
The proposed rules include a 120-day comment period, extending into the start of President-elect Donald Trump’s term, with his inauguration set for January 20.
Oil Prices Surge Amid Tightening Supply
Oil prices continued their upward momentum, with Brent crude surpassing $80 per barrel for the first time in over four months. This rise follows new U.S. sanctions targeting Russian oil producers and shipping vessels, intensifying market disruptions.
On Friday, the U.S. Treasury imposed sanctions on companies such as Gazprom Neft and Surgutneftegaz, along with 183 vessels transporting Russian oil. Analysts predict the sanctions will drive India and China to seek alternative suppliers from the Middle East, Africa, and the Americas, increasing global shipping costs and supporting higher prices.
As markets navigate a mix of economic signals and geopolitical uncertainties, investors face a challenging landscape shaped by rising bond yields, shifting Federal Reserve policy expectations, and global trade disruptions.