TLDR
- The S&P 500 fell 0.8% and the Nasdaq dropped around 1.2% on Tuesday as Treasury yields climbed above 4.6%.
- The 30-year Treasury yield briefly touched 5.2%, putting pressure on growth stocks and AI-related names.
- Wall Street is debating whether the Fed will need to hike rates to control inflation driven by oil price increases.
- President Trump paused military action against Iran, citing “serious negotiations,” but markets remained cautious.
- Nvidia earnings on Wednesday are the week’s key focus, with investor expectations running high for the AI bellwether.
U.S. stocks fell on Tuesday as Treasury yields pushed higher and technology shares extended recent losses. The moves came despite some signs of progress in talks to end the U.S.-Iran conflict.
The Nasdaq Composite dropped around 1.2%, while the S&P 500 fell 0.8%. The Dow Jones Industrial Average declined about 0.5%. The losses followed back-to-back down sessions for major indexes.
The 10-year Treasury yield climbed above 4.6% early Tuesday. The 30-year yield briefly hit 5.2%. Typically, rising bond yields put pressure on stock valuations, especially high-growth tech names.
Stocks and bonds moved lower together — an unusual pattern that has rattled investors. Normally, bonds rise when stocks fall, offering a hedge. That relationship has been breaking down.
Rising Yields and Inflation Fears Drive the Selloff
Inflation concerns are at the center of the market’s unease. Blockades in the Strait of Hormuz have pushed oil prices higher, and investors worry that could feed into broader price increases.
The Federal Reserve is now being watched closely. Some on Wall Street believe the Fed could be forced to raise interest rates if inflation continues rising. Rate hikes would weigh on valuations for growth and AI stocks, which depend heavily on low borrowing costs.
Treasury Secretary Scott Bessent added to the tension on Tuesday. Speaking in Paris, he called on U.S. allies to impose financial sanctions on Iran, including designating Iranian financiers and shutting down its bank branches. His remarks were made just before the stock market opened.
The Dow fell 0.5% at the open, as did the S&P 500. The Nasdaq was down 0.6% within the first minutes of trading.
Despite the market pressure, Deutsche Bank strategists noted that global economic data has “continued to surprise on the upside, particularly in the last couple of weeks.” That has helped risk assets hold up better than they might have otherwise.
Iran Talks and Nvidia Earnings in Focus
President Trump said Monday that “serious negotiations” are taking place over Iran’s nuclear program, and there is a “very good chance” of a deal. He said he halted military action against Iran, which had been planned for Tuesday, at the request of Gulf allies.
Markets showed some cautious optimism on the news. But yields kept rising, and tech stocks continued their slide.
Investors are also watching bond allocation data from Bank of America’s latest fund manager survey. It showed that investors’ allocation to bonds has fallen to a four-year low in May, with many favoring commodities, utilities, and emerging market stocks instead. Half of fund managers still expect a Fed rate cut within the next 12 months, the survey found.
The week’s most anticipated event is Nvidia’s earnings report on Wednesday. The company is widely seen as a barometer for the AI trade. Investor expectations are high, and the results could set the direction for tech stocks heading into the rest of the week.
At last check, the Dow sat at around 49,562, the S&P 500 at around 7,380, and the Nasdaq at around 25,960.
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