Oil prices and bond yields driving stocks

Briefing.com Summary:

*Equity futures have had a seesaw morning but are on an upswing as bond yields and oil prices come down.

*NextEra Energy (NEE) is acquiring Dominion Energy (D) in an all-stock deal.

*Oil prices have dropped on speculation about a possible deal in the making with Iran.

The stock market had a setback on Friday, largely because the Treasury market did. Yields spiked along with oil prices and were hard to ignore, with the 2-yr topping 4.00%, the 10-yr hitting 4.60%, and the 30-yr exceeding 5.10%.

It became a pertinent excuse to do some selling after a huge rally, but importantly, it was also a fundamental reason for doing so. Bond yields weren’t just moving higher here. It was (and has been) a global phenomenon tied to increased inflation pressure and fiscal concerns.

The question in front of market participants today is, does a new momentum trade take hold in the Treasury market that upends the momentum trade in the stock market?

Treasuries saw some follow-through selling overnight despite some weaker-than-expected retail sales, industrial production, and fixed asset investment data out of China. Rising oil prices were a primary driver. WTI crude futures topped $108/bbl, while Brent crude futures kissed $112.00/bbl.

Oil prices have faded from those overnight highs amid unconfirmed reports that the U.S. is offering temporary waivers on Iranian oil sanctions. WTI is at $103.10/bbl, down 2.1%, and Brent crude is at $107.76/bbl, down 1.5%. There has also been a bit of excitement over a leak to Al Arabiya of a modified Iran proposal that would include an agreement on a long-term nuclear freeze, a gradual and safe opening of the Strait of Hormuz, and the conditional transfer of its enriched uranium to Russia.

In turn, Treasuries have calmed down a bit. The 2-yr note yield is at 4.05% after reaching 4.10% overnight, and the 10-yr note yield is at 4.57% after hitting 4.63% overnight.

Currently, the S&P 500 futures are up 18 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 179 points and are trading 0.7% above fair value, and the Dow Jones Industrial Average futures are up 41 points and are trading 0.1% above fair value.

These indications are much improved from earlier this morning, demonstrating the interplay between bond yields and oil prices and the stock market’s take on it all, which is positive when yields and oil prices are both falling.

That interplay has caught everyone’s attention on a generally slow news day. An exception to this is the all-stock merger between NextEra Energy (NEE) and Dominion Energy (D). That is big news, as is Regeneron’s (REGN) phase 3 trial for its metastatic melanoma treatment not meeting the primary endpoint.

For stocks, the primary endpoint today would be positive returns. Like Friday, though, the direction of travel for Treasury yields and oil prices is apt to have some say in whether that endpoint is met.

—

Originally Posted May 18, 2026 – Oil prices and bond yields driving stocks