S&P 500 ends down as Treasury yields rise and traders fret about inflation

U.S. stocks ended down on Thursday after producer price data for August and surging oil prices stoked worries the Federal Reserve will hike interest rates next week, while climbing Treasury yields made ‌stocks less attractive.

Heavyweight chipmakers lost ground, with Nvidia down 2.3% and Micron Technology losing 4.7%, both weighing on the S&P 500. ‌Apple rallied 3.6% a day after launching a $1,999 iPhone.

With supply routes through both the Strait of Hormuz and the Red Sea disrupted by the U.S.-Israeli war on Iran, Brent ​crude jumped 6% to $107 a barrel, adding to inflation worries and fueling expectations the Fed will raise interest rates at its policy meeting on Wednesday.

Yields on 10-year Treasury notes rose to their highest in nearly three years, while 30-year Treasury yields hit their highest in more than 19 years and 2-year Treasury yields reached their highest in more than two years.

This week’s producer and consumer price reports are seen as key data ahead of that decision, with policymakers looking for further evidence that inflation pressures are continuing to cool.

Traders ⁠see a 60% chance of an increase in interest rates at next week’s Fed policy meeting, according to the CME FedWatch tool.

Apple fell 1.2% a day before an event at which it is expected to unveil its latest smartphone under new CEO John Ternus.

The S&P 500 declined 0.58% to end the session at ​7,673.52 points.

The ​Nasdaq dipped 0.32% to 26,421.41 points, while the Dow Jones Industrial Average declined ​1.18% to 52,786.07 points.

“Yields are going up at the short end of the curve because the Fed is probably ‌going to hike in the next couple months. ⁠Yields are going up at the long end of the curve because of debt and deficit issues, and sticky inflation,” said Ross Mayfield, an investment strategy analyst at Baird in Louisville, Kentucky.

“Higher yields are a negative for the ⁠equity market. They lower valuations and they make it more expensive to operate a business, and more expensive for consumers to exist in the world.”

Data on Thursday showed the U.S. producer price index (PPI) increased in line with expectations in August on a monthly basis amid a rebound in the cost of energy ​products. ​Investors will pay close attention to Friday’s August consumer price data.

The S&P 500 declined ​0.58% to end the session at 7,591.75 points.

The Nasdaq ‌declined 0.65% to 26,081.73 points, while the Dow Jones Industrial Average declined 0.60% to 52,064.10 points.

The S&P 500 has lost 2% in the past four sessions, its deepest four-day loss since June.

Nine of the 11 S&P 500 sector indexes declined, led lower by materials, down 1.45%, followed by a 0.91% loss in information technology.

Volume on U.S. exchanges was relatively heavy, with 15.1 billion shares traded, compared to an average of 14.9 billion shares over the previous 20 sessions.

Traders now see a 70% chance the Federal Reserve will raise interest rates by at least 25 basis points next ‌week, up from about 64% before Thursday’s report, the CME FedWatch tool showed.