Markets pick up gains in face of oil, bond yield surge

Diesel prices are the highest they have ever been, and bond yields have continued rising. Wall Street has taken notice but remains positive.MANHATTAN (CN) — Oil prices and bond yields resumed their distressing march upward this week, but it did not have much effect on stocks.By the closing bell Friday, the Dow Jones Industrial Average posted a weekly gain of 146 points, avoiding a fourth straight weekly decline, while the S&P 500 and Nasdaq managed to net 93 points and 546 points, respectively.Oil resumed its climb, though prices dipped late in the week amid rumors of yet another ceasefire and reopening of the Strait of Hormuz.The Trump administration’s threat of a ban on diesel exports — brought on by a new record high diesel price earlier this week of $6.52 per gallon — also sent shockwaves through the energy-trading sector. By the end of the week, barrels of Brent crude traded around $104.Experts say such a move would be counterproductive, however. “A ban on diesel exports by the U.S. would exacerbate the existing severe strains in the global diesel market and drive prices outside the U.S. even higher in the short term,” David Oxley, chief climate and commodities economist at Capital Economics, wrote in an investor’s note.“Nonetheless, given that a surplus of diesel in the U.S. could paradoxically force American refiners to cut supplies of oil products, potentially within a few weeks, a ban would ultimately be self-defeating,” he added.Others say diesel prices pose the biggest economic headwind. “The surge in diesel prices is the main upside risk to the inflation outlook,” Bernard Yaros, lead U.S. economist at Oxford Economics, wrote in an investor’s note, adding a diesel ban “could put upward pressure on gasoline prices.”Bond yields also remain top of mind for most investors as they have continued to skyrocket, again rising above the dreaded 5% threshold to settle around 5.1% by the week’s end.Increased borrowing costs have softened real estate sales, though new home sales for August beat expectations with 684,000 homes sold — 6.4% higher than in July, according to the U.S. Census Bureau. But the number lagged 2% below last August 2025, when nearly 700,000 homes were sold.“Sales are still down year over year and year to date, and builders continue to use incentives and pricing adjustments to support buyers as limited existing-home inventory helps sustain the new-home market,” National Association of Home Builders chairman Bill Owens said in a statement.Mortgage rates are higher than they’ve been all year, though they are lower than the 8% peak seen in October 2023. “Given ongoing pressures in Treasury markets, it would not be surprising to see mortgage rates move higher from here,” said Jeffrey Roach, chief economist at LPL Financial.The rise in bond yields and oil prices have taken their toll on consumer sentiment, which dropped slightly this month, according to the University of Michigan’s monthly survey, as did the related “current conditions” and “consumer expectations” indices.The survey is now at its lowest point in four months and nearly 13% lower than it was a year ago.“Short-run expected business conditions plunged amid renewed worries that elevated fuel prices and re-escalating trade disputes could pass through to the economy as a whole,” Joanne Hsu, the survey director, said in a statement, adding the diminishing view of the U.S. economy is seen across all demographic and political groups.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads