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March 5, 2026 – 18:53

(Bloomberg) — Stocks dropped on news the US is drafting rules for sweeping power over chip sales, extending a slide driven by inflation worries amid a spike in oil prices. Treasury yields climbed on reduced odds of Federal Reserve rate cuts.

Chipmakers dragged down the S&P 500 as Bloomberg News reported the US is considering regulations that would restrict AI semiconductor shipments to anywhere in the world without American approval. Nvidia Corp. sank 2.5%.

The slide in bonds put two-year yields on track for their biggest four-day surge since October 2024 as higher energy costs fuel inflation worries. Brent hit $84.

Markets have been rocked by the war in the Middle East, which entered its sixth day with no signs of easing. The conflict has boosted oil and gas prices, lifting freight rates and spawning a wave of disruption for producers and importers.

In the run-up to the payrolls report, data showed jobless claims are settling near some of the lowest levels in the last year amid a low-firing environment. Layoff announcements at US companies subsided in February.

The employment report due Friday is expected to show hiring moderated last month after a strong reading in January, and the unemployment rate held steady.

“The stronger the better given the increase in inflation expectations due to energy prices,” the JPMorgan Market Intelligence desk led by Andrew Tyler said.

A weaker number would boost rate-cut wagers, the team said, but the risk is “stagflation” in the near term due to the expected increase in inflation.

The S&P 500 fell 1.2%. The yield on 10-year Treasuries climbed four basis points to 4.14%. The dollar added 0.5%. West Texas Intermediate topped $79.

With inflation expectations building, bets on Fed rate reductions have eased. Swaps priced in less than 40 basis points of cuts in 2026, down from 60 basis points at the end of last week.

Fed Bank of Richmond President Tom Barkin said the central bank’s response to the war will depend on how long the impact on the economy lasts.

Assuming the conflict is resolved over the coming weeks, the spike in oil will likely prove transitory, with Brent trading back down to the forward curve strip price of around $65, according to Chris Senyek at Wolfe Research.

“If the equilibrium for oil settles in higher, there is clearly still upward pressure on the 10-year yield,” he said.

Higher oil prices raise the risk of another breakdown in stock-bond correlations, but bonds can still diversify equity risk, according to Morgan Stanley strategists including Serena Tang.

“If a sustained oil shock could push growth lower and inflation higher, we may see a repeat of the 2021–2023 environment when stocks and bonds sold off together,” they said.

Whether short- or long-duration bonds provide better diversification depends on whether inflation risks or growth concerns dominate going forward, the strategists concluded.

Corporate Highlights:

Broadcom Inc. Chief Executive Officer Hock Tan said the company expects its AI chip sales to top $100 billion next year. Amazon.com Inc.’s cloud unit is launching AI tools for medical practices. Morgan Stanley is eliminating about 3% of its global workforce, targeting investment-banking and trading businesses as well as the wealth and asset-management operations. Berkshire Hathaway Inc. CEO Greg Abel said he will use all of his take-home pay to acquire the conglomerate’s stock for as long as he’s in the role. Kroger Co.’s new CEO laid out a value-focused vision to boost top-line growth of the largest US supermarket operator. Some of the main moves in markets:

Stocks

The S&P 500 fell 1.2% as of 12:44 p.m. New York time The Nasdaq 100 fell 1.1% The Dow Jones Industrial Average fell 2% The MSCI World Index fell 1.1% Currencies

The Bloomberg Dollar Spot Index rose 0.5% The euro fell 0.4% to $1.1587 The British pound fell 0.3% to $1.3331 The Japanese yen fell 0.4% to 157.67 per dollar Cryptocurrencies

Bitcoin fell 3.3% to $70,886.85 Ether fell 3.9% to $2,067.33 Bonds

The yield on 10-year Treasuries advanced four basis points to 4.14% Germany’s 10-year yield advanced nine basis points to 2.84% Britain’s 10-year yield advanced 10 basis points to 4.54% Commodities

West Texas Intermediate crude rose 6.1% to $79.24 a barrel Spot gold fell 1.5% to $5,061.24 an ounce ©2026 Bloomberg L.P.