Stock markets worldwide drop from records as worries about oil prices
rattle the bond market
[May 16, 2026] By
STAN CHOE AP
NEW YORK (AP) — The U.S. stock market fell from its records Friday and
joined a worldwide drop for stocks after higher oil prices sent a shiver
through the bond market. Stocks that had been caught up in the euphoria
around artificial-intelligence technology led the way lower.
The S&P 500 fell 1.2% from its all-time high set the day before. The Dow
Jones Industrial Average dropped 537 points, or 1.1%, and the Nasdaq
composite sank 1.5% from its own record.
Technology stocks tumbled in a sharp turnaround from their meteoric
rises for much of the year, which had carried markets worldwide to
records but also raised criticism that they had gone too far.
Nvidia, the stock that quickly became the face of the AI revolution,
dropped 4.4% and was the heaviest weight on the S&P 500. It had come
into the day with a gain of more than 26% for the year so far.
Micron Technology was another one of the heaviest weights on the market
after falling 6.6%. It’s nevertheless still up nearly 154% for the year
so far.
“To us, it looks like markets have pushed into overbought territory,”
according to Brian Jacobsen, chief economic strategist at Annex Wealth
Management. He said the strong corporate profits and durable U.S.
economy that launched U.S. stocks to records remain intact, but “the
path is unlikely to be smooth. Periods like this call for discipline
more than hope.”
In the meantime, rising oil prices are raising the pressure after
already worsening inflation by more than economists had feared. The war
with Iran is continuing, and the Strait of Hormuz remains shut to oil
tankers, which is preventing them from delivering crude to customers
worldwide and driving up oil’s price.
The price for a barrel of Brent crude oil, the international standard,
rose 3.3% to settle at $109.26 and is well above its level of roughly
$70 from before the war.
Many big U.S. companies have been saying their customers have been able
to keep spending on their products and services despite having to pay
higher prices for gasoline. But U.S. households have also been telling
surveys they’re feeling discouraged about the economy and the pressures
building on them because of the war and tariffs.
The worries were most clear Friday in the bond market, where Treasury
yields climbed. The yield on the 10-year Treasury rose to 4.59% from
4.47% late Thursday. That’s a notable move for the bond market, and it’s
well above its 3.97% level from before the war.
The yield on the 30-year Treasury reached 5.13% and is back to where it
was in 2007, before the financial crisis sent yields crashing toward
zero in the ensuing year.
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Trader Patrick Casey works on the floor of the New York Stock
Exchange, Wednesday, May 13, 2026. (AP Photo/Richard Drew)
 Higher yields can make mortgages and
other kinds of loans going to U.S. households and businesses more
expensive, which slows the economy. They also tend to push downward
on prices for stocks and all kinds of other investments.
Stocks of smaller companies had some of Friday’s sharpest drops.
Many of them need to borrow cash to grow, which means higher
borrowing costs can hurt them more than their big rivals. The
Russell 2000 index of the smallest U.S. stocks fell 2.4%, double the
S&P 500’s loss.
All told, the S&P 500 fell 92.74 points to 7,408.50. The Dow Jones
Industrial Average dropped 537.29 to 49,526.17, and the Nasdaq
composite sank 410.08 to 26,225.14.
Yields have been climbing since the war on worries about higher
inflation and how it may tie the Federal Reserve’s hands when it
comes to short-term interest rates. Not only have traders abandoned
virtually all expectations that the Fed will resume its cuts to
interest rates this year, they’ve been building some bets that it
may even hike rates in 2026, according to data from CME Group.
A couple of reports on the U.S. economy that came in better than
expected also helped to lift yields. One said U.S. industrial
production improved by more last month than economists expected,
while another said manufacturing in New York state is expanding at a
faster rate.
In stock markets abroad, indexes fell by more than 1.5% across much
of Europe and Asia.
South Korea’s Kospi dropped 6.1% for one of the biggest moves. It’s
set records this year because of the influence of AI beneficiaries
like SK Hynix. But it quickly reversed momentum Friday after briefly
topping the 8,000 level for the first time.
Some on Wall Street have been warning about a possible break in
momentum for tech stocks in general and AI winners in particular.
“If nothing else this should be a ‘shot across the bow’ for how
volatility works both ways,” according to Jonathan Krinsky, chief
market technician at BTIG.
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AP Business Writer Chan Ho-him contributed.
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