Stocks end lower amid rising oil and Treasury yields a day ahead of jobs report

Wall Street on Thursday ended lower as oil prices climbed after a media report said an Iranian and Omani framework to reopen the Strait of Hormuz would prohibit passage of U.S. vessels until compensation was paid. Reports also said Iran had attacked some targets in the vital waterway. 

Investors had already taken a beat earlier after a stellar start to August this week. The technology sector eked out a gain, but the advance was capped by renewed concerns around the artificial intelligence trade. Chip stocks gained, but memory storage providers Sandisk and Western Digital fell after their quarterly results.

Meanwhile, U.S. Treasury yields also put pressure on stocks a day ahead of a closely-watched nonfarm payrolls report which could give further cues about monetary policy outlook.

The benchmark S&P 500 index shed 0.2% to close at 7,710.08 points, the blue-chip Dow Jones Industrial Average slid 0.9% to settle at 53,885.16 points, and the tech-heavy NASDAQ Composite declined 0.1% to finish at 26,348.35 points.

"After a surge that saw the S&P 500 gain more than 5% and technology stocks rise nearly 11%, a pause is both normal and healthy. Part of today’s consolidation reflects higher oil prices and Treasury yields as investors position ahead of tomorrow’s employment report," Keith Lerner, chief investment officer and chief market strategist at Truist, told Investing.com.

Tech today: Memory sell-off, Google bond sale, and SpaceX lock-up expiry

The technology sector remained in the spotlight on Thursday, having been a key driver of both Wall Street’s middling performance in July and its rebound at the end of that month.

Sandisk and Western Digital saw a negative session with losses of 6.8% and 13%, respectively. Both companies delivered quarterly top- and bottom-line beats, but their guidance failed to live up to sky-high expectations set by the furious rallies in their stocks heading into the earnings.

Outsized demand for data storage because of the AI boom had significantly benefited both firms. Western Digital largely focuses on traditional hard disk drives, while Sandisk, which WDC spun out in 2025, focuses on NAND flash memory and solid state drives. The former’s stock had jumped 153% YTD ahead of the latest quarterly report, while the latter had seen a whopping 414% YTD jump.

The weakness in their shares had earlier bled into Asian trade, with South Korean memory chipmakers Samsung Electronics and SK Hynix tumbling and dragging down the broader KOSPI index. Japan’s Nikkei 225 also fell.  

Elsewhere in the tech space, class A shares of Alphabet fell 1.3%. The Google-parent is expected to price a massive 10-part bond sale on Thursday, with Bloomberg News reporting that the tech titan was looking to fetch as much as $25 billion. The behemoth, along with fellow so-called hyperscalers Meta, Microsoft, and Amazon, is raising money in order to sustain the billions of dollars being poured into AI infrastructure.

SpaceX also grabbed some attention. The stock slumped nearly 14% on Wednesday after the rocket maker’s first public quarterly results sparked concerns about elevated AI-related spending. It rebounded on Thursday, adding 6.1% even as 911.5 million shares valued at approximately $100 billion were released from lock-up agreements that previously restricted insiders from selling.   

Oil climbs as report says Iran-Oman Hormuz plan to prohibit U.S. passage

Turning to the Middle East, market participants remained on watch for any headlines about a framework between Iran and Oman to reopen the critical Strait of Hormuz.

Iran’s Fars News said the initial text of the Hormuz plan was under review by authorities, citing parliament member Alireza Salimi. According to the plan, passage of U.S., Israeli, and other hostile vessels through the vital waterway would be prohibited until compensation was paid, Fars said.

The news agency separately reported that according to the plan, entry into the strait would be through the northern corridor near the Iranian coast and exit would be through the southern corridor near the Oman coast, citing an informed source in the foreign ministry. After a specified deadline, transit through both corridors would be stopped and would instead take place through a middle corridor, with Iran managing the entry and jointly managing the exit with Oman.

If true, these aspects of the plan would most likely be unacceptable to Washington. Oil prices hit session highs after the headlines, then later scaled fresh peaks after Fars News reported that Iran had struck hostile targets in the Strait of Hormuz. Iran’s Tasnim News Agency, citing informed courses, said two explosions heard on Qeshm Island were tied to action against the targets near the entrance of the chokepoint.

Brent crude futures, the global oil benchmark, were last up 4.5% to $83.04 a barrel. 

President Donald Trump earlier this week said he had called off a powerful planned attack against Iran due to progress towards a deal, while warning that Washington was "ready to go" if an agreement was not reached. Both sides have engaged in a cycle of threats, attacks, and concessions since the onset of their war in late-February. 

Trump on Wednesday was asked what made him think this time was different in terms of Iran holding up their end of a deal, to which he said: "It may be, it may not be."

"In life, they know when you’re ready to go and when you’re just bluffing. We were ready to go — and we are ready to go if we have to do that," the president added. 

Jobs report in focus amid mixed data

Away from the Middle East and back at home, watchers of monetary policy were looking ahead to Friday’s July nonfarm payrolls report for cues on interest rates. Labor market indicators this week have been mixed so far.

U.S. job openings growth in June came in lower than expected and moderated from May. Separately, private employment growth in July arrived softer than anticipated and decelerated from June. On the other hand, the number of Americans filing for initial jobless claims remained below 200k for a third straight week, a streak not frequently seen since the late 1960s. 

The data suggested that the overall labor market remained resilient and supported the Federal Reserve’s recent switch to focusing more on its inflation mandate. Volatility in oil prices due to the ongoing conflict in the Middle East has upended inflationary dynamics and has caused division among Fed policymakers as to the appropriate path of monetary policy.

An ongoing sell-off in U.S. Treasury bonds pushed up yields, reflecting jitters over the Fed falling behind on inflation. On Thursday, the benchmark U.S. 10-year yield was last up 4.9 basis points to 4.666%, while the more rate-sensitive 2-year yield was up 6.4 basis points to 4.243%.

"Friday’s jobs report is of greater importance for markets given how fast this stock market has rallied over the past week, and ultimately we will need to see a number that is not too hot and not too cold in order for the market to keep grinding higher," Clark Bellin, president and chief investment officer at Bellwether Wealth, said.

"(The report) may put upside or downside pressure on bond yields, which are already at the upper end of their recent trading range. If bond yields get too high, that could make stocks less attractive and also keep a lid on stock prices until rates settle down," he added. 

Ambar Warrick and Scott Kanowsky contributed to this article