U.S. Treasury yields jumped on May 15 in a delayed response to rising inflation trends. The timing is interesting because it is Jerome Powell’s last day as Fed chairman. The move has been dramatic: The 30-year Treasury Bond yield is up 10 basis points (bps) to 5.11%, above the September 2023 high; you have to go all the way back to May 2007 to find this yield. The 20-year is above 5% for the first time since September 2023. The 10-year is up 11bps to 4.57%, the highest since November 2024. The 2-year is up 8bps to 4.07%, the highest since January 2025.
Helping to fuel the jump in Treasury yields is the renewed rise in crude oil prices, up approximately 3%, as the Iran conflict shows no progress.
Related: JPMorgan pulls no punches on Strait of Hormuz, oil prices
Rumors are swirling that shortages are emerging in products such as jet fuel and will become widespread by late summer if the Strait of Hormuz isn’t opened. In the meantime, the existing high level of fuel costs is rippling through the economy, raising plane tickets by 20% and in the face of consumers at the gas pump.
Disappointment on Trump’s China trip
The damage to stocks has been widespread. All the major indexes opened down at least 1%. The volatility index, or VIX, rose 2 full points to 19.27. The Russell 2000, which has smaller, more indebted companies, most vulnerable to higher interest rates, is down 2.2%. Semiconductors gave back the most; down 4.3% at the bottom but recovering to -3.3%.
After hitting a new all-time high yesterday, NVIDIA is down 4.0%.
Related: Bank of America resets Nvidia stock price target for 2026
Part of the weakness in tech is disappointment that Trump is coming home from China without any agreements regarding chip sales. All we’ve heard about is that China will buy some Boeing jets. China did agree with President Trump that Iran cannot have a nuclear weapon and that the Strait of Hormuz must be open, so these were some positive developments.
Another sector taking heat from the higher interest rates is precious metals. Gold is down 2.6%, silver is down by a whopping 9.5%, and copper is down 4.9%. Crypto is also down, with Bitcoin down 2.6%.
Keeping things in perspective, despite the strong pullback on higher interest rates today, stocks are still up for the week. Higher interest rates will remain problematic but should ease materially when the Iran conflict gets resolved.
The trend remains positive: Earnings are strong and rising with record profit margins, and the economy appears strong as reflected in solid data on manufacturing today.
Related: Goldman Sachs sends blunt message on Fed interest rate cuts
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