Market Pulls Back from Record Highs Amid Growing Concerns Over Inflation

U.S. Stocks Retreat as Crude Prices Surge and Inflation Fears Rise

U.S. stocks fell from record highs on Friday, May 15, as a surge in crude prices and concerns about long-term inflation sparked fears of a global economic downturn. The Dow Jones Industrial Average declined 406.40 points, or 0.81%, to 49,657.06, while the S&P 500 lost 50.23 points, or 0.67%, to 7,451.01, and the Nasdaq Composite dropped 195.89 points, or 0.73%, to 26,439.34.

The sharp decline in the stock market was triggered by a jump in benchmark Treasury yields, reflecting surging energy prices and concerns about inflation. The yield on 10-year Treasury notes touched its highest level since May 2025, when markets were reeling from President Donald Trump's "Liberation Day" tariff proclamation. Global bond yields also jumped on growing evidence of the Iran war's widespread economic damage.

The Federal Reserve, led by outgoing Chairman Jerome Powell, is facing a challenging situation as it prepares to take over the reins from incoming Chairman Kevin Warsh. Powell's last day as Fed chair marks the end of his tenure, which has included navigating the pandemic, periods of inflation, and interest rate hiking and cutting cycles. Warsh will be under pressure to address the potential need for a rate hike if a protracted Iran war leads to sticky inflation.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The odds of the Fed hiking interest rates by 25 basis points in December are approaching 40%, up from 13.6% a week ago, according to CME Group's FedWatch tool.

Among the 11 major sectors in the S&P 500, energy shares jumped 1.6%, while materials and utilities suffered the steepest percentage losses. The Philadelphia SE Semiconductor Index slid 2.3%, dragged lower by stocks that have benefited from the AI hyperscaler phenomenon. Nvidia and AMD fell by 2% and 3.1%, respectively, while Intel dropped 5.1%. Microsoft rose 4.4% following the disclosure of a new position in the company taken by Bill Ackman's hedge fund Pershing Square. Dexcom jumped 6.7% following the medical device maker's announcement that it will appoint two independent directors and revamp a board committee in collaboration with activist investor Elliott Investment Management.

Declining issues outnumbered advancers by a 3.78-to-1 ratio on the NYSE, with 88 new highs and 146 new lows on the NYSE. On the Nasdaq, 1,163 stocks rose and 3,484 fell as declining issues outnumbered advancers by a 3-to-1 ratio. The S&P 500 posted 12 new 52-week highs and 27 new lows, while the Nasdaq Composite recorded 47 new highs and 132 new lows.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline