The S&P 500 shed 0.5% and the Nasdaq sank 1.2% Tuesday as the 30-year Treasury yield touched its highest level in nearly two decades. Rising oil prices tied to the Iran standoff and a widening U.S. fiscal deficit added to the pressure on stocks.
U.S. stock indexes retreated Tuesday morning as long-dated Treasury yields surged toward multidecade highs. The Dow Jones Industrial Average eased 0.1%. The S&P 500 shed 0.5%, and the Nasdaq composite sank 1.2%. Small caps also weakened, with the Russell 2000 losing 0.5%.
30-year Treasury yield nears its highest since 2002
The U.S. 30-year Treasury bond hit a new 19-year high earlier Tuesday before easing to trade at 5.305%, nearing its highest level since 2002. The 10-year Treasury note yield, the main benchmark for mortgages and auto loans, was little changed at 4.72%. The 2-year yield edged down to 4.175%. Government borrowing costs climbed globally too: Japan's 10-year bond reached a 30-year high, while Germany's 30-year yield hit its highest level since 2011.
Oil rises as the Iran deadline lapses
Oil prices also rose after the 60-day deadline for the U.S. and Iran to secure a peace deal expired Monday, with Iran ruling out an extension, according to state media. A senior Iranian official also told Reuters that Tehran would take an offensive stance if diplomacy with the U.S. fails.
According to Deutsche Bank's Jim Reid: "There wasn't a single catalyst for the declines", though he noted investors were pricing in a more extended closure of the Strait of Hormuz. West Texas Intermediate crude futures rose to around $84.95 a barrel Tuesday morning.
Fiscal deficit widens as debt costs mount
The moves follow news that the U.S. fiscal deficit jumped to $432.3 billion in July, its highest monthly total since March 2021, pushing the year-to-date shortfall to nearly $1.8 trillion. Interest payments on the nearly $40 trillion national debt have cost the government about $1.2 trillion this year.
Meanwhile, U.S. import prices fell 0.4% in July, compared with the 0.1% gain economists had expected, even as broader inflation readings stay above the Fed's 2% target.
Sources: US Top News and Analysis, Investor's Business Daily
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