Oil Prices & Rate Hike Fears Send Stocks Plunging – Market Update

Modern York — Stock markets declined sharply Friday as oil prices surged, extinguishing hopes for potential interest rate cuts by the Federal Reserve this year. The S&P 500 fell 1.5% to close at 6,506.48, marking its fourth consecutive weekly loss – the longest such streak in a year. The Dow Jones Industrial Average dropped 443.96 points, closing at 45,577.47, while the Nasdaq composite tumbled 2% to 21,647.61.

Brent crude, the international benchmark, rose 3.3% to settle at $112.19 per barrel, and U.S. Benchmark crude gained 2.3% to $98.32 per barrel. The increases followed a volatile trading session where early dips were reversed, accelerating losses in the afternoon. Rising oil prices are fueling concerns about persistent inflation and complicating the Federal Reserve’s monetary policy decisions.

The bond market also reacted negatively, with the yield on the 10-year Treasury rising to 4.38% from 4.25% late Thursday, and the two-year Treasury yield leaping to 3.88% from 3.79%. Higher yields increase borrowing costs for businesses and consumers, potentially slowing economic growth.

According to data from CME Group, traders have largely abandoned expectations of interest rate cuts by the Federal Reserve this year. Some analysts now suggest the possibility of a rate increase in 2026, a scenario considered unlikely before recent geopolitical developments. Ann Miletti, head of equity investments at Allspring Global Investments, stated that a rate hike “would be market shaking,” but also acknowledged that sustained high oil prices could ultimately prevent the Fed from raising rates due to their potential drag on the economy.

The market’s downturn was further compounded by a significant drop in the stock of Super Micro Computer, which lost a third of its value after the U.S. Government accused a senior vice president and two others of conspiring to illegally export advanced Nvidia chips to China. The company stated it is cooperating with the investigation and has placed the accused employees on administrative leave.

The sell-off was broad, with roughly three out of four stocks in the S&P 500 declining. Smaller companies, particularly vulnerable to higher interest rates, experienced the steepest losses, with the Russell 2000 index falling 2.3%. FedEx was a rare bright spot, rising 0.8% after reporting stronger-than-expected profits for the latest quarter.

European and Asian stock indexes also fell sharply Friday. Indexes in China declined, while South Korea’s Kospi saw a modest gain of 0.3%.

The price of gold, often considered a safe haven asset, finished the week at $2,374.90 per ounce, a decline from earlier highs this year when it briefly surpassed $2,400 per ounce. The shift reflects the impact of rising bond yields, which make gold less attractive relative to interest-bearing investments.