Rising Yields, Oil Interrupt Rally, Hurting Chips
Published as of: August 18, 2026, 9:13 a.m. ET
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| The markets | Last price | Change | % change |
|---|---|---|---|
| S&P 500® Index | 7,745.06 | -40.70 | -0.52% |
| Dow Jones Industrial Average® | 53,459.78 | -272.63 | -0.51% |
| Nasdaq Composite® | 26,644.91 | -84.25 | -0.32% |
| 10-year Treasury yield | 4.74% | +0.01 | -- |
| U.S. Dollar Index | 99.63 | +0.02 | Unch |
| Cboe Volatility Index® | 15.78 | +0.59 | +3.88% |
| WTI Crude Oil | $85.18 | +$0.68 | +0.80% |
| Bitcoin | $64,295 | -$115 | -0.18% |
(Tuesday market open) Monday's weakness spilled into the new day, and the reasons are familiar. Bond yields and oil keep spinning higher, raising borrowing costs for companies and investors while progress stalls in the Middle East. Chips took the brunt of the early blow.
On a positive note, Home Depot's (HD) results appeared to impress, providing the Dow Jones Industrial Average an early lift. In another home-related development, today's July housing starts and building permits data looked mixed, with permits—a leading indicator—up 5% monthly and topping estimates at a seasonally adjusted annual 1.44 million. Starts missed consensus.
On Monday, Wall Street turned red across the board, haunted by a jump to fresh highs above 5.3% for the 30-year bond yield and 4.72% for the 10-year yield, accompanied by another gain for crude. The 60-day Iran ceasefire ended and nothing appeared to take its place as both sides traded belligerent words, keeping Middle East shipping traffic a ghost of normal levels. Ten of 11 S&P 500 sectors fell Monday, with only energy up as oil and diesel kept climbing. Chip stocks supported tech yesterday but went the opposite way this morning.
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Three things to watch
- Yields, inflation flex muscle: Though stocks rallied in the past with yields higher than now, the recent rapid yield growth comes at an auspicious time as corporate borrowing surges to fund AI spending. The U.S. 30-year yield trades at 19-year highs, and yields overseas are up, too. Rising oil and yields often go hand in hand with higher prices and there's growing concern about the Federal Reserve hiking rates before year-end. Chances are 70% of at least one hike, up from last week, according to the CME FedWatch Tool. "Inflation remains in the driver's seat for stocks," said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research (SCFR). He explained that bond yields and stocks now have the most negative correlation since 1997, meaning when one goes up the other goes down. This implies that the bond market is keying more off inflation data than growth data, giving inflation the upper hand when it comes to equities. The long rally took place when market participants seemed relatively sure the war would soon end. Now that's unclear and could explain recent stumbles.
- Credit check shows calm: Credit spreads are an under-the-radar metric that can be a canary in the coal mine for the stock market. So far, the canary remains on its perch despite concerns about heavy corporate bond issuance, especially from so-called AI hyperscalers. "Corporate bond new issuance has generally been well received," said Collin Martin, head of fixed income research and strategy at SCFR. "Spreads are back where they started the year after rising in March…. It seems unlikely that spreads will fall much further, if at all, but the resilient economy and strong corporate earnings should keep spreads from rising much further." A sudden rise in high-yield spreads has often been an early warning sign of trouble for the broader market--notably in 2022 when inflation hit 40-year highs-- but for now spreads remain well-behaved.
- AMD confirms new holdings as buying trend continues: The recent trend of AI-related companies buying shares of smaller industry firms continued this week as Advanced Micro Devices (AMD) disclosed updated portfolio positions in a 13F filing with the SEC. The filing included shares of SpaceX (SPCX) and Nutanix (NTNX), a U.S. cloud computing company that sells software for data centers. This raises the profile of Nutanix much the way Nvidia's (NVDA) buy of Nebius (NBIS) shares earlier this year raised that company's profile. Nebius reported last week and shares soared. Nutanix isn't guaranteed stock market success simply because AMD owns shares. Its victories and struggles, however, could draw increased market reaction. These small holdings aren't likely enough to move the needle much for shares of Nvidia or AMD themselves, but one-time investment gains for big tech have heightened dramatic second quarter earnings growth. When Nvidia reports next week, investors need to differentiate how much of any earnings gain is organic versus how much it reflects investments in firms like Nebius.
On the move
- Home Depot (HD) climbed almost 2% after reporting earnings and revenue that topped consensus despite what one company executive called "a frozen" housing market and customers mostly avoiding large do-it-yourself purchases. The company reaffirmed its fiscal 2027 earnings and revenue guidance, easing minds.
- Lowe's (LOW), a Home Depot competitor, enjoyed a 1.6% jump in share price after Home Depot reported. Lowe's reports tomorrow, as does retail giant Target (TGT). Walmart (WMT) is due Thursday.
- SK Hynix (SKHY), Sandisk (SNDK), and Western Digital (WDC) were among the memory stocks reversing yesterday's gains and down 5% or more this morning. There's concern rising borrowing costs could hurt companies trying to build data centers, weighing on chip demand.
- Fabrinet (FN) plunged 10% early despite strong earnings and guidance. Investors appeared concerned about what the company said might be a temporary margin headwind, CNBC reported. The optical manufacturing company's struggles today appeared to spill into trading of other chip infrastructure firms.
- Alibaba (BABA) rose almost 3% after its mobile and digital wallet platform Alipay launched China's first full-stack agentic commerce platform for merchants, Briefing.com reported.
- SpaceX (SPCX) rose more than 5% Monday despite facing more shares becoming available to trade later this week.
- Constellation Brands (STZ) fell more than 6% Monday after Berkshire Hathaway (BRK.B) announced it had exited its position in the stock.
- Strategy (MSTR) climbed 4% Monday after the Treasury Department said it seeks public comment on the GENIUS Act, designed to establish rules for stablecoins.
- Nike (NKE) lost 4% Monday and is down 39% year-to-date, partly due to rising competition and a recent JPMorgan Chase downgrade, CNBC noted.
- The June Treasury International Capital report showed net inflows of $6.8 billion into Treasury notes and bonds from foreign investors, down from May, and the buyer base was mixed. Foreign private investors bought $16.6 billion, their smallest monthly inflow since January, while foreign official investors were net sellers with $9.8 billion in net outflows. The report's data is dated, meaning it might not have much market impact.
- Long-dated bond yields in Japan approached May's 40-year highs today, and the German 30-year bond yield hit its highest level since 2011. All this could hurt demand for U.S. Treasuries, with various governments chasing investor money and providing more competition. Fed minutes due tomorrow afternoon could provide insight into any discussion about borrowing costs.
- The Cboe Volatility Index (VIX) continued climbing from last week's 2026 lows, up another 3.75% this morning. This could indicate hedging demand picking up after a slow period and ahead of September, historically the weakest month on Wall Street.
More insights from Schwab
Assessing dividend risk: Investors who trade options on stocks that pay cash dividends need to understand how these payments can affect options prices, exercise, and assignment—or risk having their trading strategies derailed. Schwab's article on dividend risk examined how it can affect those factors and other strategy outcomes.
The U.S. debt story: In a new analysis, researchers from SCFR examined the potential outcomes of a shift in federal borrowing from cyclical to structural, meaning interest costs are now consuming ever more of federal revenue.
Keeping an eye on housing data: With an onslaught of housing data this week, my colleague Gordon discussed in the Week Ahead the three main pillars of affordability he's watching for in the data: interest rates, existing home prices, and wage growth.
Wedding planning: Schwab's latest financial planning article examined six smart tips to help you stay on track financially while planning a wedding.
Chart of the day
Data source: CME Group, ICE. Chart source: thinkorswim® platform.
Past performance is no guarantee of future results.
For illustrative purposes only.
Gold (/GC-candlesticks) posted its highest close since early June yesterday and is above its 50-day moving average (blue line) as the dollar index ($DXY—purple line) descends from summer peaks. The dollar is down in part on ideas the Fed might not hike as quickly due to weak U.S. data, which also drags the dollar. Gold tends to climb when yields and rates stay down as investors look for perceived inflation protection.
The week ahead
Check out the investors' calendar for a summary of the top economic events and earnings reports on tap this week.
August 19: FOMC minutes and expected earnings from Analog Devices (ADI), TJX Companies (TJX), Lowe's (LOW), Target (TGT), and Estee Lauder (EL).
August 20: Conference Board Leading Indicators for July and expected earnings from Walmart (WMT), Alibaba (BABA), Deere (DE), NetEase (NTES), and Ross Stores (ROST).
August 21: No major earnings or data expected.
August 24: No major earnings or data expected.
August 25: August Consumer Confidence, July new home sales, and expected earnings from Bank of Montreal (BMO), Dick's Sporting Goods (DKS), Intuit (INTU), and Zoom (ZM).