Dow Tumbles as Treasury Yields Climb Above 5% and Oil Prices Soar

The Dow Jones Industrial Average dropped by around 200 points to just under 52,400, while the Nasdaq Composite declined by about 1% due to a sell-off in chip stocks. The decline was partly driven by rising Treasury yields, which climbed above 5% for the first time since October 2023. This shift in interest rates has led to higher borrowing costs, with the average 30-year mortgage rate reaching 6.76%, up from 6.15% at the start of the year.

The chipmakers in the Dow, including Nvidia, Broadcom, Advanced Micro Devices, Intel, and Marvell Technology, fell between 3-7% due to concerns over artificial intelligence model development slowing down. Meanwhile, Microsoft and Amazon held steady as they are major buyers of chips. Oil prices also increased after Saudi Arabia shut its East-West pipeline, pushing WTI above $103 a barrel.

Markets are pricing in a high probability of a quarter-point rate hike by the Federal Reserve on Wednesday, which could lead to further increases in rates through 2027 than currently anticipated. With retail sales forecasted to decline and housing starts data due out soon, investors may consider putting options on homebuilder and consumer discretionary equities.