Bond Yields Surge as Energy Powers Higher

U.S. equities were little changed on Thursday, with the S&P 500 (IVV) slipping 0.08% as gains in select mega-cap names offset broader weakness tied to a sharp jump in Treasury yields. Developed ex-U.S. markets (EFA) declined 0.29%, while Emerging Markets (EEM) underperformed with a 0.68% drop, though EM still holds a 23.54% year-to-date gain. Fixed income came under pressure as the U.S. Aggregate Bond index (AGG) fell 0.48%, consistent with the reported surge in the 10-year Treasury yield to 5.11%. The clear outlier was Broad Commodities (DJP), which advanced 0.76% on the day and now sits up 41.45% year-to-date, driven largely by energy strength amid Strait of Hormuz supply concerns.

U.S. equity style performance was uniformly negative outside of Large Growth (IVW), which edged up 0.11% and carries an RSI of 59, reflecting continued relative strength versus the rest of the size/style spectrum. Large Cap (IVV) was roughly flat at -0.08%, while Large Value (IVE) declined 0.30% with an RSI of 40. Small and mid-cap segments broadly lagged, with Mid Value (IJJ) down 0.65% and Small Cap (IJR) off 0.26%; both carry oversold RSI readings of 27 and 28, respectively, alongside Small Value (IJS) at an RSI of 27. Breadth remains thin across smaller-cap categories, with only 14-22% of constituents trading above their 50-day moving averages in mid and small segments, underscoring the narrow leadership concentrated in large-cap growth names.

Sector performance was led by Communication Services (XLC), up 1.27%, and Health Care (XLV), up 0.63%, consistent with reported gains in large communications names. Energy (XLE) rose 0.37% and holds a 42.79% year-to-date gain, reflecting the crude oil rally tied to Hormuz-related supply risk. On the downside, Materials (XLB) fell 1.19% and Utilities (XLU) declined 0.98%, with Utilities showing an oversold RSI of 21 and just 3% of constituents above their 50-day moving average. Financials (XLF) were essentially flat at -0.02% but remain technically weak with an RSI of 27 and only 8% of members above the 50-day average, while Technology (XLK) slipped 0.32% despite an overbought RSI of 64.

Thematic flows favored biotechnology and genomics on Thursday, with the ARK Genomic Revolution ETF (ARKG) gaining 5.13% and the Global X Genomics & Biotechnology ETF (GNOM) adding 3.67%, alongside the iShares Genomics Immunology and Healthcare ETF (IDNA) up 2.23%. The ARK Innovation ETF (ARKK) also advanced 2.15%, consistent with broader risk appetite in innovation-oriented strategies. Conversely, cannabis-focused funds lagged, with the AdvisorShares Pure US Cannabis ETF (MSOS) falling 4.60% and the Amplify Seymour Cannabis ETF (CNBS) down 3.67%. The Sprott Junior Uranium Miners ETF (URNJ) and Invesco Solar ETF (TAN) both declined more than 3%, reflecting pressure across alternative energy and uranium-linked names.

Within developed markets, Japan (EWJ) declined 1.28%, the largest move among major country funds, despite maintaining a 19.30% year-to-date gain. The Netherlands (EWN) and Hong Kong (EWH) posted modest gains of 0.34% and 0.27%, respectively, providing a partial offset. In emerging markets, South Korea (EWY) fell 1.68% on the day but remains up an exceptional 87.75% year-to-date and 133.24% over one year. Indonesia (EIDO) declined 1.71% and continues to carry a steep 34.41% year-to-date loss, while Taiwan (EWT) bucked the trend, rising 0.52% and extending its year-to-date advance to 77.99%.

Fixed income broadly declined as Treasury yields climbed to multi-decade highs, with Long-Term Treasuries (BLV) falling 1.19% and (SPTL) down 1.14%, both now off more than 5% year-to-date. Core Aggregate exposure (AGG) slipped 0.48% and Mortgage-Backed Securities (MBB) declined 0.74%, reflecting duration sensitivity to the reported jump in the 10-year yield to 5.11% and the 30-year to 5.438%. Shorter-duration instruments held up better, with Ultrashort Treasuries (BIL) essentially flat at -0.01% and Short-Term Treasuries (SPTS) down just 0.07%. High Yield (HYG) fell a more modest 0.27%, consistent with its lower duration profile relative to investment-grade credit.

Energy commodities led broad gains, with Natural Gas (UNG) surging 6.26% and WTI Crude (USO) up 2.86%, while Brent Crude (BNO) advanced 2.45%, consistent with reported Strait of Hormuz supply concerns. WTI Crude now stands up 121.36% year-to-date. Precious metals moved lower, with Silver (SLV) down 0.93% and Gold (GLD) off 0.30%, pressured by a stronger dollar and rising yields as reported. Agricultural commodities were broadly softer, with Sugar (CANE) down 0.88% and Wheat (WEAT) off 0.43%.

Crypto-linked funds were mixed but mostly higher, with Solana exposure (SOLZ) gaining 2.37% and XRP (XRP) up 2.27%, both extending strong three-month gains above 44%. Ethereum exposure (ETHA) rose 0.59% but remains down 9.36% year-to-date, while Bitcoin exposure (IBIT) slipped 0.15%, still off 3.71% for the year. Multi-Coin exposure (NCIQ) edged up 0.33% despite a 5.55% year-to-date decline, reflecting continued divergence between shorter-term momentum and longer-term underperformance across digital asset products.

Friday’s calendar features August Durable Goods Orders, with consensus looking for a 0.3% headline decline against a 1.1% prior print, while Core Durable Goods Orders are expected at 0.6% versus 0.4% previously. The final September University of Michigan Consumer Sentiment reading is due at 10:00 AM ET, following a weak preliminary print of 47.8. Investors will also monitor a series of Federal Reserve speakers, including John Williams, Hammack, and Schmid, as officials continue their post-meeting commentary tour. Corporate calendar items are scheduled for Oracle, Microsoft, Expedia, Lockheed Martin, Planet Fitness, Meta, Build-A-Bear, and Unity, though specific timing was not detailed.