Nasdaq Slumps Over 1% as Oil Prices and Treasury Yields Weigh Heavy on Tech Stocks

The Nasdaq Composite index fell by over 1% on Tuesday, August 18, as rising Treasury yields and escalating tensions in the Middle East weighed heavily on tech stocks.

The decline was attributed to a sharp increase in longer-dated U.S. Treasury yields, with the 30-year yield touching 5.3371%, its highest level since 2007, before easing slightly. This move higher put pressure on growth and technology stocks as it increased borrowing costs and reduced the relative attractiveness of future earnings.

Oil prices also contributed to the decline, reaching their highest level since late July due to renewed uncertainty over the U.S.-Iran conflict. Higher energy prices can add to inflation pressures and complicate the Federal Reserve's interest-rate outlook.

Despite softer U.S. economic data reducing expectations for an immediate Federal Reserve rate increase, a renewed acceleration in inflation caused by higher energy prices could change those expectations. Investors are closely watching oil prices, economic data, and upcoming Fed signals for clues about the path of interest rates.