Dow Jones Industrial Average (DJIA) Edges Up While S&P 500 Drops As 10-Year Yield Hits 5%

The S&P 500 Index (NYSE: SPY) is down 0.11% in Friday trading, while the Dow Jones Industrial Average (NYSE: DIA) is off 0.39% and the Nasdaq 100 (NASDAQ: QQQ) is edging up 0.09%.

Markets are broadly mixed as rising crude oil prices stoke fresh inflation fears and push bond yields sharply higher into the session.

WTI crude oil is up nearly 1% on the day, lifting inflation expectations and weighing on risk sentiment across the broader market.

The 10-year Treasury note yield has climbed 6.6 basis points to 4.996%, approaching the closely watched 5% threshold that has historically unsettled equity investors.

T-notes are under additional pressure following Wednesday’s Federal Reserve decision to raise interest rates by 25 basis points, with the central bank signaling another hike later this year.

Markets are currently pricing in a 58% probability of a further 25 basis point rate increase at the next FOMC meeting scheduled for October 27-28.

Weak U.S. economic data is adding to the negative tone, with August manufacturing production unexpectedly falling 0.3% month-over-month, the largest monthly decline in 10 months, against expectations for a 0.3% gain.

August leading indicators also surprised to the downside, dropping 0.1% against forecasts for a 0.1% rise, marking the first decline in five months.

Volatility is elevated today due to triple witching, the quarterly expiration of equity options, futures, and derivatives, with Citadel Securities estimating approximately $7 trillion in options set to expire, one of the largest expirations on record.

Index rebalancing activity is also in focus, with Bloom Energy, Illumina, and Everpure set to join the S&P 500 after the close, while SpaceX will receive a weighting boost from a Nasdaq 100 rebalance.

Bitcoin surged more than 5% to a two-week high after the SEC moved forward with a plan to allow digital versions of securities to begin trading in the United States, triggering broad gains across cryptocurrency-exposed equities.

Strategy (NASDAQ: MSTR) is up more than 11% to lead Nasdaq 100 gainers, and Coinbase Global (NASDAQ: COIN) is up more than 10% to pace S&P 500 advancers on the back of the SEC development.

MARA Holdings, Circle Internet Group, Bullish, and Robinhood Markets are each up more than 7%, while Galaxy Digital Holdings has gained more than 6% in the session.

Chipmakers are providing a meaningful offset to broader market weakness, with the iShares Semiconductor ETF (NASDAQ: SOXX) rising more than 1% and SanDisk surging more than 6%.

Lam Research and Applied Materials are each up more than 4%, while Seagate Technology Holdings and Broadcom have gained more than 3% apiece.

Software and cybersecurity stocks are under notable pressure, with Thomson Reuters and Oracle each falling more than 3%, and IBM dropping more than 3% to lead Dow Jones losers.

Cloudflare has shed more than 5%, while Palo Alto Networks and SentinelOne are each down more than 4%, and CrowdStrike Holdings and Fortinet have fallen more than 3%.

Xenon Pharmaceuticals has plunged more than 29% after the company paused enrollment in clinical studies for major depressive disorder and bipolar depression.

Nucor is down more than 5% to lead S&P 500 decliners after forecasting third-quarter earnings per share of $5.55 to $5.65, below the consensus estimate of $5.99.

Netflix has dropped more than 4% after Wells Fargo Securities downgraded the stock to underweight from equal weight with a price target of $57.

Middle East tensions continue to support crude oil prices, with Reuters reporting that China privately asked Iran to help rein in Houthi militants in Yemen, who have attacked Saudi energy facilities and advanced toward the Bab-el-Mandeb strait.

Saudi Arabia reported that its crude production in August fell to 6.238 million barrels per day, the lowest level since 1990, while the country works to restore roughly half the capacity of the East-West pipeline following drone strike-related shutdowns.

Overseas, the Euro Stoxx 50 is down 1.30%, while China’s Shanghai Composite closed up 0.94% at a one-week high and Japan’s Nikkei-225 closed up 1.38%, also at a one-week high.