Major US stock indices opened lower on Thursday, as inflation worries and rising Treasury yields overshadowed optimism over easing Middle East diplomatic tensions and the continued artificial intelligence boom.

Traders broadly expect the Federal Reserve to raise interest rates further. Oracle shares fell, dragging down the technology sector.

The Dow Jones Industrial Average dropped 0.37%, the S&P 500 fell 0.48%, and the Nasdaq declined 0.76%.

Among the "Magnificent Seven": Meta Platforms rose 1.79%, Alphabet fell 0.31%, Apple dropped 0.38%, Tesla declined 0.83%, Nvidia fell 1.17%, Amazon dropped 1.23%, and Microsoft declined 1.67%.

According to sources, Oracle is preparing to invoke force majeure clauses to protect itself from risks tied to delays at a data center project in New Mexico. Following the news, Oracle shares plunged more than 5%.

Meta unveiled multiple products at its Connect developer conference on Wednesday evening, including the launch of a Muse AI agent. The company's Muse agent has quickly climbed the rankings of popular apps on major app stores and has recently been credited with boosting market optimism about AI demand.

In corporate news, Darden Restaurants reported first-quarter results that missed expectations, sending its shares lower, while Costco is set to report earnings after the closing bell.

On the economic data front, US initial jobless claims for the week ending September 19 edged lower, remaining near historic lows.

The Bond Market Selloff Continues Unabated

The bond market selloff has spread to Asia as well. On Thursday, government bond yields in Japan, Australia, and New Zealand all rose by more than 10 basis points. Japan's 10-year government bond yield climbed to a 30-year high during overnight Asian trading.

The selloff in long-dated US Treasuries continued. The US 10-year Treasury yield — the core benchmark for the $29 trillion US Treasury market and a key anchor for pricing nearly all global financial assets — briefly rose to 5.145% during European morning trading, hitting its highest level since the global financial crisis. The 30-year Treasury yield rose 3 basis points to 5.43%.

The renewed sharp surge in the US 10-year Treasury yield has brought back painful memories for many investors. The stock market's surprisingly resilient performance suggests investors may not be willing to confront that history head-on.

Historical experience shows that a sharp spike in bond market financing costs often places heavy pressure on stocks. The last time the US 10-year Treasury yield broke above 5% was on the eve of the global financial crisis, after which the MSCI World Index was cut in half. Less than a decade ago, a similar situation occurred when US Treasury yields surged to nearly 6.8%, becoming one of the factors that burst the dot-com bubble.

Of course, we are absolutely not in the midst of a global financial collapse right now. It would be too reckless to assert that stocks are on the verge of a crash simply because Treasury yields have returned to 2007 levels. But the phenomenon warrants close attention, and investors may want to dial back their risk appetite for equities.

The spread between French and German government borrowing costs has also widened to its largest level since former European Central Bank President Draghi's "whatever it takes" speech in 2012.

Strong PMI data and a poorly received US Treasury auction further intensified the global bond selloff on Wednesday. Gilles Moec, chief economist at AXA, said all the conditions are now in place to drive long-term rates higher. Moec stated: "Inflation is high, central bank officials keep sending hawkish signals, the technology sector's enormous financing needs are also competing for capital, and the US debt path still shows no reassuring signs." He added: "These are all very significant macro issues in themselves, and on top of that, there is a binary geopolitical variable — namely, how the situation in the Middle East will unfold."

Arun Sai, a strategist at Pictet Asset Management, said: "There is clearly anxiety in the bond market, without a doubt." He added: "We are going through a phase where the steady-state equilibrium is being challenged on multiple fronts, with competing narratives, and it is not yet clear which one is correct."

Several Fed and ECB officials are also scheduled to speak on Thursday, including New York Fed President John Williams, Cleveland Fed President Beth Hammack, and ECB Executive Board members Isabel Schnabel and Philip Lane.

IIF: Global Debt Rose $10 Trillion in First Half, Topping $365 Trillion

Data from the Institute of International Finance shows that global debt surged by $10 trillion in the first half of this year, with total outstanding debt exceeding $365 trillion. Developed economies such as the US, Japan, and Europe are facing surging deficits and interest payment pressures, with interest expenses exceeding $3.3 trillion last year — more than global spending on defense, AI, or clean energy individually. The IIF warned that the debt problem has evolved into a political issue, creating a "vicious cycle between election cycles and short-term emergency policies; as the marginal utility of new debt diminishes, long-term fiscal vulnerabilities accumulate." The report added: "As benchmark rates rise, interest expenses will surge significantly; and the structural pressures from healthcare and public pension spending remain largely unaddressed."

Goldman Sachs Asset Management: Fed Unlikely to Enter Sustained Rate-Hike Cycle

Goldman Sachs Asset Management said in a report that it still does not expect the Fed to enter a sustained rate-hike cycle. The firm stated: "We believe tariff- and energy-related price pressures may fade, the economy shows few signs of overheating, and inflation expectations remain anchored." The Fed's dot plot from last week's meeting indicated one more rate hike this year. According to LSEG data, money market pricing shows a cumulative 37 basis points of rate hikes across the Fed's two remaining meetings this year.