Nasdaq Futures Drops 1% as High Yields, Oil Sap Risk Appetite.

Stocks fell as bond yields hovering near a two-decade high and rebounding oil prices drove traders away from risk.

The S&P 500 looked set to nearly erase its early-week advance as futures fell 0.64%. Nasdaq 100 contracts dropped 1.01%.

A selloff in Treasuries that pushed yields across much of the curve to the highest since 2007 stalled, with rates at the shorter end edging lower. Brent rose above $103 a barrel in a second straight day of gains. The dollar, gold and Bitcoin were little changed.

An artificial-intelligence-fueled rally in stocks that drove the Nasdaq 100 to a record high is petering out amid growing concern that higher bond yields will pressure valuations and draw demand away from equities.

The latest pressure in bond markets followed another bout of anxiety over stubborn inflation, strong growth and mounting fiscal risks that could keep interest rates higher for longer. While losses in Treasuries have been among the most severe, the selloff also swept into Asia on Thursday, with yields in Japan, Australia and New Zealand climbing by more than 10 basis points.

“The key question is whether yields are rising because growth remains strong or because investors demand compensation for inflation and fiscal risks,” said Simon Wiersma, chief investment strategist at ING Bank. “My base case is not that higher yields trigger a broad equity bear market, but they are likely to cap valuation expansion and make earnings growth increasingly important.”