Bond yields above 5% pressure technology shares and lift market risk

US stocks extended their retreat on Thursday as a sharp rise in long-term Treasury yields put renewed pressure on technology and other growth-oriented shares. The 10-year Treasury yield reached 5.15%, its highest level since July 2007, while the 30-year yield touched 5.446%, a level last seen in June 2004, TradingNews.com reported.

By mid-morning, the Dow Jones Industrial Average was down 190.91 points, or 0.37%, at 51,320.68. The S&P 500 had fallen 0.23% to 7,688, while the Nasdaq Composite was 0.49% lower at 26,804. The Nasdaq was more than 400 points below the record close it had reached two sessions earlier.

The sell-off followed a weaker session on Wednesday, when the S&P 500 dropped 0.75%. The Nasdaq had lost 1.13%, the Dow declined 352.10 points and the Russell 2000 fell 1.8%. More than 72% of US-listed issues ended Wednesday lower, while 10 of the S&P 500’s 11 sectors finished in negative territory.

Why higher yields are weighing on shares

The rise in borrowing costs has been concentrated at the longer end of the Treasury curve. The two-year yield was little changed on Thursday after reaching a 2023 high of 4.897% earlier in the week. That contrast suggests investors are demanding more compensation for holding longer-dated bonds, reflecting concerns about inflation and the additional risk associated with long maturities.

Higher long-term yields affect the valuation of companies whose expected profits lie far in the future. Technology and artificial-intelligence businesses are particularly exposed because much of the cash flow investors anticipate is not expected to arrive until 2028 or later. When the discount rate rises, the present value of those future earnings falls.

That helps explain the day’s market pattern. Nasdaq futures were down 1.1% before the opening, compared with a 0.6% decline for S&P 500 futures. The Dow held up better, while smaller companies remained vulnerable because many carry greater exposure to floating-rate borrowing and domestic financing conditions. Russell 2000 futures were down 0.45% overnight.

Consumers are also facing higher costs. The average rate on a 30-year fixed mortgage reached 7.12%, its highest point in more than two years. The increase affects housing affordability and raises the cost of purchases financed through credit, including vehicles.

The week began with strong gains. The Nasdaq and S&P 500 recorded their best sessions since early August on Monday, and the Nasdaq then reached a record close of 27,244 on Tuesday. The declines on Wednesday and Thursday have since erased much of that advance.

Oracle adds pressure to the AI trade

The bond-market sell-off coincided with a setback for one of the most important themes in the technology market. Oracle shares fell 7.37% to $133.91 by late morning, compared with a previous close of $144.57. The company’s stock had already been down 5.4% in premarket trading.

The decline followed Oracle’s force majeure notice to Stack Infrastructure, the Blue Owl Capital unit developing a New Mexico data-centre campus known as Project Jupiter. Oracle is seeking protection from higher costs if construction runs behind schedule and wants the ability to delay payments if the site is not ready in 2028.

The project is described as a $165 billion artificial-intelligence campus with a planned capacity of 2.45 gigawatts. Oracle has not abandoned the development, but the contractual dispute raised questions about the timing and cost of AI infrastructure spending. Those concerns were especially damaging because they appeared while rising yields were already reducing the appeal of long-duration growth shares.

Other individual stocks also moved sharply. MGM Resorts fell more than 9% after an $18 billion buyout proposal was withdrawn. Darden, TD Synnex and BlackBerry featured among the companies reacting to earnings, while gold-mining shares declined as bullion reached a one-week low.

Caution rises, but panic has not arrived

The latest economic data offered little relief to investors. Weekly jobless claims came in below expectations, reinforcing the picture of a resilient labour market. A housing report at 10 a.m. also added to the week’s run of stronger economic signals. Such results can support the case for interest rates remaining high, which has made positive economic news a negative for stocks through the bond market.

Equities did recover some ground after the opening. The Nasdaq was initially down 0.8%, the S&P 500 fell 0.5% and the Dow lost 182 points shortly after trading began. Later, losses narrowed as the front end of the Treasury market moved lower while longer-dated yields held steady.

Health care, energy and selected software and cybersecurity companies attracted buyers, while semiconductors and AI-infrastructure names remained under pressure. The shift suggested investors were moving toward businesses with nearer-term cash flow rather than broadly rebuilding exposure to equities.

The VIX volatility index rose 7.12% to 16.26. TradingNews.com characterised that move as a rise in caution rather than evidence of panic. For now, the market’s central test remains the 10-year yield: with it above 5%, investors are reassessing both the price of future earnings and the financing demands behind the AI boom.