NEW YORK (AP) — Fluctuations in the bond market are affecting stock markets globally on Thursday, countering optimism regarding growth in the artificial intelligence sector. The S&P 500 decreased by 0.1%, potentially marking its seventh decline in eight days. The Dow Jones Industrial Average fell by 64 points, or 0.1%, as of 12:49 p.m. Eastern time, while the Nasdaq composite dropped by 0.2%.
In Europe, losses were more pronounced, with London's FTSE 100 declining by 1.7% after the yield on the 10-year U.K. government bond rose to 5.53% before settling at 5.37%. The CAC 40 in Paris also fell by 1.6% following similar fluctuations in the yield of the 10-year French government bond.
High bond yields can slow economic growth by increasing borrowing costs, which negatively impacts stock and other investment prices. Current rising yields are attributed to concerns about high inflation and oil prices, indications of a robust U.S. economy, and government spending exceeding revenue.
Oil prices increased again on Thursday, with Brent crude rising by 3.2% to $101.13, amid uncertainties regarding the war with Iran and its effects on the global oil market.
Recent reports indicate that the U.S. economy is navigating its challenges effectively, with fewer workers applying for unemployment benefits last week, suggesting a potential decrease in layoffs. Additionally, a report indicated stronger-than-expected overall economic growth in the spring.
A separate report noted continued growth in U.S. manufacturing for September, although it highlighted an acceleration in price increases, which could exert additional inflationary pressure. The yield on the 10-year Treasury briefly approached 5.34% following the manufacturing report but retreated to 5.24%, remaining near its highest level since 2002. This yield has risen from below 5% just last week and under 4% prior to the onset of the war with Iran.
High yields particularly affect real estate owners by increasing borrowing costs and prompting income-seeking investors to shift from real estate stocks to bonds. BXP, which owns office buildings, fell by 1.8%, while Alexandria Real Estate Equities, which manages life sciences campuses, dropped by 3.4%.
However, technology stocks showed resilience, bolstered by a positive quarterly profit report from Micron Technology, which exceeded analysts' expectations. The company reported strengthening growth and provided optimistic forecasts, attributing its success to demand driven by the AI sector. Micron's stock decreased by 1.1%, likely due to its previous gains exceeding 270% for the year, compared to the S&P 500's less than 12% rise.
Other AI-related stocks saw gains, with Applied Materials increasing by 2.7% and Nvidia rising by 1.2%. Outside of technology, Accenture surged by 18.3% after reporting stronger-than-expected profits, reflecting growth across various regions, including the Americas and Asia.
In international markets, Asian indexes performed better, buoyed by optimism surrounding AI following Micron's report, with Japan's Nikkei 225 rising by 3.3% and South Korea's Kospi increasing by 1.9%.