### U.S. Stocks Dip as Treasury Yields Hit Seasonal Highs

U.S. stocks experienced a decline on Monday, attributed to rising Treasury yields reaching their highest levels since the summer months. The S&P 500 index dropped by 0.4% during afternoon trading, maintaining proximity to an all-time high achieved just a week earlier. Similarly, the Dow Jones Industrial Average fell by 225 points, or 0.5%, while the Nasdaq composite index also declined by 0.4%.

This drop in stock prices comes after a strong rally, driven by relief that interest rates are decreasing now that the Federal Reserve has broadened its focus to foster economic growth instead of solely combating inflation. Last Friday's impressive U.S. jobs report heightened optimism about the economy and hopes for a balanced strategy by the Fed. Goldman Sachs economist David Mericle reduced his recession probability estimate from 20% to 15% following the job report.

However, the robust employment data also led traders to reassess their expectations for future Fed interest rate cuts, pushing Treasury yields higher. The 10-year Treasury yield climbed above 4% for the first time since August, and the two-year Treasury yield briefly surpassed 4%, up from 3.50% two weeks ago. Higher yields on Treasury bonds, which are seen as very safe investments, tend to lower the propensity of investors to pay high prices for riskier assets like stocks.

The earnings season for companies listed on the S&P 500 is about to kick off, with analysts predicting a 4.2% growth in earnings per share for this past summer compared to last year, potentially marking the fifth consecutive quarter of growth. Technology and healthcare sectors are expected to lead this increase. PepsiCo is scheduled to release its quarterly results on Tuesday, followed by financial titans JPMorgan Chase, Wells Fargo, and Bank of New York Mellon on Friday.

Meanwhile, Duckhorn Portfolio, a prominent winemaker, saw its shares more than double after a private equity firm announced plans to acquire the company for approximately $1.95 billion in cash. Bank stocks remained relatively stable, with gains from Friday’s strong jobs report fostering expectations that consumers will continue to borrow and repay loans reliably.

Elsewhere, utility stocks and real estate owners experienced losses, partly due to higher interest rates on bonds luring potential buyers away. The bond market reflected these shifts, with the 10-year Treasury yield rising to 4.02% and the two-year Treasury yield increasing to 3.98%. Oil prices also saw a surge, influenced by fears that escalating tensions in the Middle East could disrupt crude supplies. Brent crude rose by 3.4% to $80.73 per barrel, while U.S. benchmark crude increased by 3.6% to $77.07 per barrel.

Internationally, European markets had mixed results, despite stronger performances in Asia. Japan's Nikkei 225 index rose by 1.8%, fueled by a weakened yen which benefits Japanese exporters. Nintendo's shares climbed 4.4% following reports of a potential increase in investment from a Saudi wealth fund. In China, stock markets were set to reopen Tuesday after a weeklong holiday, with expectations high as the government prepares to unveil economic stimulus details aimed at reviving the real estate market.