US stocks fall as 10-year Treasury yield hits 2007 levels: What it means for markets

US stocks opened lower on Thursday as investors worried about inflation and rising bond yields. The sell-off in US government bonds pushed Treasury yields higher, making investors more cautious about stocks.

US stocks fall as 10-year Treasury yield hits 2007 levels (Bloomberg)The Dow Jones Industrial Average fell 0.2%, while the S&P 500 dropped 0.4%. The tech-heavy Nasdaq Composite declined 0.8%. The main pressure on stocks came from the bond market. The benchmark 10-year Treasury yield had risen above 5% on Wednesday, reaching its highest level since 2007. The yield edged lower on Thursday but remained at historically high levels.

The 30-year Treasury yield also climbed to its highest level since 2004. Higher long-term Treasury yields can increase borrowing costs across the economy, including for companies, homebuyers and consumers.

The jump in the 10-year yield came as investors assessed signs of stronger economic activity and persistent inflation. A S&P economic barometer showed strong business growth, adding to concerns that inflation could remain high.

Higher oil prices are adding another inflation risk. Brent crude futures traded above $105 a barrel on Thursday after recently moving above the $100 level. Expensive oil can make inflation harder to control because energy costs affect businesses, transportation and consumers.

This has increased investor concerns that the Federal Reserve may need to keep interest rates higher for longer.

New York Fed President John Williams said another interest-rate hike by the end of the year would be “reasonable.” His comments added to expectations that the Fed could continue tightening monetary policy, as noted by Yahoo Finance.

Traders were pricing in a 69% chance of another Fed rate hike in October, according to the CME FedWatch tool. That market pricing can change as new inflation, jobs and economic data are released.

The combination of high Treasury yields, inflation worries and possible further Fed hikes is creating pressure on stocks. Higher bond yields can make safer government debt more attractive compared with riskier assets such as stocks.

The situation is particularly important for growth and technology stocks. Higher interest rates can reduce the present value investors place on companies whose expected profits are further in the future, which can put pressure on technology-heavy indexes such as the Nasdaq.

Still, investors are also watching the artificial intelligence boom and major technology companies. Recent optimism around AI has helped support stocks even as concerns about interest rates and inflation have increased.

Meta unveiled new cameraless virtual-reality glasses at its Connect event on Wednesday. The company also announced plans to make money from its Muse AI agent.

Meta's Muse AI agent has quickly gained popularity. Yahoo Finance reported that Muse, which debuted on September 8, became the top app on both Apple's App Store and Google's Play Store.

Meta CEO Mark Zuckerberg said the company expects to eventually earn money by taking a small fee from transactions made through Muse. Zuckerberg said Meta plans to keep Muse free for a large number of tokens while building a transaction-based business model.

Meta is expanding Muse's shopping and payment capabilities. Meta chief AI officer Alexandr Wang said the company has added PayPal support and integrations with retailers including Walmart, Best Buy, Gap, Sephora, Wayfair and American Eagle.

Muse is also being expanded into travel and grocery shopping. Meta is adding Expedia connectivity for travel and Instacart for grocery purchases.

Meta is also rolling out computer-control capabilities for Mac computers. Wang said the AI agent will be able to take control of a Mac and perform tasks on behalf of users.

The broader market is also watching US-China relations. President Donald Trump's planned meeting with Chinese President Xi Jinping is a major event for investors because trade, technology and critical minerals remain important issues for both countries.

Treasury Secretary Scott Bessent said the US and China agreed to extend their trade truce for another two months, through January 10. Artificial intelligence competition, the Iran war and critical minerals are expected to remain among the key topics in discussions.

Several major US technology CEOs are expected to join Trump and Xi for a dinner. That makes the meeting particularly relevant for investors watching the future of US-China technology and trade relations.

The labor market is showing signs of stability despite the pressure from higher rates. US initial jobless claims fell slightly for the week ending September 19.

Weekly jobless claims dropped by 1,000 to 197,000. Economists had expected 201,000 claims, according to Reuters. Continuing jobless claims stood at 1.72 million for the week ending September 12.

The low level of new claims suggests the US labor market remains relatively strong. However, a strong labor market can also complicate the Fed's fight against inflation. If employment and economic activity remain strong, policymakers may have less reason to cut interest rates quickly.

Individual company results also moved stocks on Thursday. MGM Resorts shares fell sharply after billionaire investor Barry Diller's People Incorporated withdrew its proposal to buy the casino and resort company.

MGM shares dropped about 10% at the open after the takeover proposal was withdrawn. Diller said the parties could not bring together the right combination of factors needed to complete the deal.

People Incorporated had offered $48.30 per MGM share in cash in June. The proposed transaction was valued at about $18 billion, including debt.

MGM shares were trading around $34 on Thursday after the withdrawal. Diller said People Incorporated still owns 66.8 million MGM shares, representing about 27% of the company.

MGM's underlying business had shown some positive signs before the takeover offer was withdrawn. The company reported improving revenue trends at its Las Vegas Strip resorts and expressed optimism about resilient travel bookings despite weaker consumer sentiment.

Darden Restaurants was another stock under pressure. Shares fell after the restaurant company reported first-quarter results that missed expectations.

Costco is another company investors are watching. Costco was scheduled to report its fiscal fourth-quarter results after Thursday's market close.

The key issue for markets now is how long Treasury yields can remain at these elevated levels. The 10-year yield returning to levels last seen in 2007 has brought back memories of a very different period for financial markets.

The last time the 10-year Treasury yield reached these levels was July 2007. Yahoo Finance noted that the global financial crisis began only a few months later as the US housing market collapsed.

The Nasdaq subsequently lost 56% over the following 16 months during that financial crisis, according to Bull Theory, as cited by Yahoo Finance. That historical comparison is one reason investors are paying attention to today's Treasury yield levels.

But today's high yields do not by themselves mean another financial crisis is coming. Yahoo Finance's Brian Sozzi cautioned that the current environment should not automatically be treated as a repeat of 2007.

The important difference is that today's market is not currently facing the same confirmed housing and financial-system collapse seen during the 2008 crisis. The 2007 comparison is therefore a historical warning rather than evidence that a similar crash is underway.

For stock investors, the biggest concern is the effect of higher borrowing costs on companies and consumers. If Treasury yields remain high, financing can become more expensive and investors may demand stronger returns before buying riskier assets.

Higher yields can also change where investors put their money. When government bonds offer higher returns, some investors may become less willing to take additional risk in stocks.

For technology stocks, the pressure can be especially important because many high-growth companies are valued based on future earnings. Higher interest rates can reduce the value investors place on those future profits.

For consumers, higher rates can also mean more expensive borrowing. Mortgage rates, credit costs and other loans can remain under pressure when longer-term Treasury yields rise.

The market is therefore balancing two opposing forces: continued optimism around AI and economic growth versus inflation, oil prices and higher interest rates. The direction of Treasury yields remains one of the most important factors investors are watching.

In short, Thursday's stock decline is less about one single company and more about the changing interest-rate environment. The 10-year Treasury yield reaching levels not seen since 2007 has made investors more cautious, while rising oil prices and the possibility of another Fed hike are adding to the pressure.

Durva More is a Senior Content Producer at Hindustan Times, where she covers finance, and global news. She brings experience across digital and television journalism, with a strong focus on breaking news, business reporting, and international affairs. Before joining Hindustan Times, Durva worked as an International News Writer at The Economic Times, covering a diverse range of subjects including global politics, business, sports, entertainment, and major world events. She also worked as a Business Reporter with NDTV Profit. A postgraduate diploma holder in Journalism from the Asian College of Journalism, Durva is passionate about field reporting and storytelling. She thrives on the adrenaline of chasing stories, speaking with people from different walks of life, and amplifying voices that deserve to be heard. Her reporting is driven by curiosity, accuracy, and a commitment to making complex subjects accessible to readers. When she is not chasing stories or covering breaking news, Durva enjoys reading books and painting. She loves exploring new ideas, meeting people, and learning about different perspectives. For her, both journalism and art are ways to understand the world and tell stories that matter.Read More