TLDR
- The S&P 500 fell 0.69% for a third straight losing session, dragged down by rising bond yields and a chip stock selloff
- The U.S. 30-year Treasury yield hit a fresh 19-year high; bond yields also surged in Japan, Germany, and France
- Semiconductor stocks led losses, with several names dropping between 7% and 9%
- The Fed is set to release minutes from its July meeting, with markets watching for rate clues
- Anthropic more than doubled revenue to $11.6 billion in Q2, surpassing OpenAI for the first time
Wall Street closed lower for a third day in a row on Tuesday as rising bond yields and a sharp drop in chip stocks weighed on equities. The S&P 500 fell 0.69% to 7,691.76. The Nasdaq Composite dropped 1.33% to 26,289.71. The Dow Jones Industrial Average shed 116 points, or 0.22%.
Several semiconductor stocks took heavy losses. Western Digital fell 7%. Sandisk dropped 9%. Marvell Technology and Seagate Technology were also down roughly 8% and 9%, respectively.
Analysts at Vital Knowledge said the chip selloff was driven by a mix of profit-taking and concerns around a flood of debt issuance tied to the artificial intelligence boom. Questions around the sustainability of AI infrastructure spending have been growing.
Bond Yields Surge Globally
The U.S. 30-year Treasury yield hit a fresh 19-year high on Tuesday. Japan’s 10-year bond yield reached its highest level in 30 years. Germany’s 30-year bond yield climbed to its highest since 2011. France’s 30-year government bond yield hit its highest point since 2008.
Rising oil prices added to the pressure. U.S. crude futures climbed 0.5% on Tuesday to $84.94 per barrel. Stalled Iran-U.S. negotiations kept supply concerns alive.
President Trump said on Tuesday that the U.S. is not engaged in any talks with Iran and that the naval blockade “remains in full force and effect.”
Bill Fitzpatrick, portfolio manager at Logan Capital Management, said the market has been overlooking the bond yield challenge. He added that the factors driving yields higher are not going away soon.
Fed Minutes and Earnings in Focus
U.S. stock futures were muted on Wednesday ahead of the release of Federal Reserve minutes from the July policy meeting. The Fed held rates steady at that gathering, but three members dissented in favor of a 25-basis-point hike.
Fed Chair Kevin Warsh gave no forward guidance, saying only that the Fed will “not waver” in its commitment to bringing inflation to 2%.
On the earnings front, Target and Lowe’s are set to report. Home Depot posted better-than-expected second-quarter results on Tuesday, helped by demand for repair and maintenance work.
Chipmaker Analog Devices will also report. The company’s third-quarter revenue forecast beat estimates back in May, pointing to steady AI-related demand for its components.
President Trump announced a three-day pause on planned 50% tariffs on Canadian goods, saying a deal is in place subject to final paperwork. The tariffs had targeted around $20 billion in Canadian products.
In AI company news, Anthropic reported $11.6 billion in Q2 revenue, more than doubling its prior quarter result and surpassing OpenAI for the first time. OpenAI posted $6.7 billion in revenue for the same period, an 18% quarter-on-quarter rise that fell short of investor expectations. Anthropic also reported a small operating profit.
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