The Ten-Year Touched Five Per Cent, Brent Held Near 107, and Chip Stocks Fell on a Warning From the People Who Sell Them

The number that mattered on Monday was not on a stock screen. The ten-year Treasury yield traded through five per cent for the first time since 2023 before easing back, the thirty-year sat at 5.33, and Germany's ten-year Bund reached 3.51 per cent, a level not seen since 2009. Japan's ten-year touched three. Those are the prices of money for the next decade in the three largest bond markets, and all of them moved the same way for the same reason: oil near 107 dollars, a Federal Reserve about to raise rates into it, and a Bank of Japan expected to do the same on Friday.

The close

Wall Street's losses were modest given the backdrop. The S&P 500 fell 0.48 per cent to 7,619.98, the Dow 152 points to 52,421.20 and the Nasdaq 0.56 per cent to 26,186.41, according to Zacks figures on Yahoo Finance. The selling was concentrated in semiconductors. Nvidia lost more than two per cent; Micron, Marvell, Super Micro and SK Hynix around six; Intel, AMD, CoreWeave and SanDisk four or more. The trigger was the call from Anthropic's Dario Amodei, endorsed by Sam Altman and Elon Musk over the weekend, for the industry to slow the pace at which it improves its models. Kathleen Brooks of XTB made the point that matters for index investors: more than half of the S&P 500's sectors are now linked to AI and the largest hyperscalers are about a third of its weight, so a slowdown that hurts chips and infrastructure first is not a sector story. Cybersecurity went the other way, with CrowdStrike, Palo Alto and Okta higher, and Bank of America fell more than five per cent on a weaker dealmaking forecast. SoftBank, which borrowed another 11.9 billion dollars for OpenAI, fell 13 per cent in Tokyo.

Oil and the pipeline

Brent traded between 107.82 and 108.04 in Asia and settled near 107, up about two per cent; WTI was above 102. The reason is the East-West pipeline, shut since Friday after drones from Iraq hit its pumping stations, and the Houthi attack on Khamis Mushait on Monday morning. "Markets are likely to remain focused on the risk that higher crude oil prices could add to inflationary pressures," Yokoo Akihiko of Mitsubishi UFJ Bank told Reuters, which is the polite version of what every rates desk was saying.

The week

The Federal Open Market Committee meets Tuesday and Wednesday and announces at 2 p.m. Washington time, with Kevin Warsh's press conference at 2.30. Futures put a quarter-point rise, to 3.75 to 4 per cent, at about ninety per cent, up from 72 on Thursday, after Friday's inflation figures. Deutsche Bank expects the projections to show stronger growth and stickier inflation, which would leave the door open to a second rise before the year ends. August retail sales arrive the same morning, with Deutsche looking for a 0.9 per cent rebound after July's fall. The Bank of England decides Thursday. The Bank of Japan is expected on Friday to raise its policy rate a quarter point to 1.25 per cent, which would be its highest since 1995 and a further reason the yen, at 154.61 to the dollar, has stopped weakening. Friday is also triple witching, when index futures, index options and stock options expire together, which tends to exaggerate whatever mood the Fed has left behind.

Gold slipped 0.15 per cent to 4,291 dollars and silver to 63, both a shade below their records, which tells you the metal is being held as insurance against the very thing rising yields are supposed to cure. The dollar index was flat at 99.53 and the euro at 1.1543. Our reading is the one we gave on Friday: the Fed's decision is no longer the question. The dot plot and the word Warsh uses for the oil shock are. If the committee signals a second rise, five per cent on the ten-year will stop being a level the market touches and become one it lives at.