Stocks Slide as Oil Tops $108 and Ten-Year Yield Breaks 5%

US stocks finished Tuesday's session lower, caught between a jump in energy prices and a sharp move higher in government bond yields. The combination left investors with little appetite for risk as they waited for the Federal Reserve's policy decision the following day.

Brent crude climbed past $108 a barrel after a Saudi pipeline was shut down, adding fresh upward pressure to inflation expectations. At the same time, the ten-year Treasury yield rose above 5% for the first time since 2007, a level that raises borrowing costs across mortgages, corporate credit and consumer loans.

Futures markets now assign a 93% probability that Fed Chair Kevin Warsh will announce a rate hike on Wednesday. That would mark his first such test since taking the helm, and it puts the central bank in the unusual position of tightening while growth signals remain mixed.

Higher oil and higher yields are a difficult pairing for equities, since both work against company valuations and consumer spending power. Investors will be watching Wednesday's decision closely for any signal about how far this tightening cycle might run, and whether policymakers see the energy shock as temporary or something more lasting.