US stocks edge higher as bond yields retreat for now

Thursday's bond market trended favorably, counteracting weakness in European equities and surging oil prices. Despite these headwinds, US stocks managed to climb higher during the trading day. The S&P 500, a broad-based index, closed the day up by 0.2%. However, the yield on the 10-year US Treasury, which had reached its highest level since 2002 a week prior, began to retreat.

Analyst Sam Stovall from CFRA Research attributed the turnaround to opportunistic buying of bonds, noting that investors appeared to find these yields, decades-old, attractive. The 10-year bond yield had surged to such an extent that Stovall believed investors saw it as a favorable entry point, prompting them to buy bonds and lock in these elevated yields.

European markets, however, ended the day lower, with French and UK 10-year yields hitting their highest levels since the 2000s. The performance of 30-year bonds also mirrored multi-decade highs due to mounting concerns about inflation. Paris stocks dropped 1.5%, further weighed down by the French government's plans to raise taxes and cut spending in an effort to reduce the country's deficit.

In Asia, Tokyo and Seoul stock markets closed strongly, buoyed by Micron Technology's impressive earnings announcement from the previous day, as well as positive artificial intelligence (AI) developments. The strong results from the US memory chip company provided a much-needed boost amid ongoing worries about the excessive investment in the AI sector and queries about when companies would begin seeing returns.

Despite these gains in Asia, markets remained cautious due to the potential escalation of the US-Iran conflict. Recent diplomatic efforts had not yielded any agreement, leaving traders to wait for Friday's US jobs data, which could provide insight into whether the Federal Reserve would introduce another round of interest rate hikes, aimed at tackling high inflation, in October.