Major U.S. stock indices fell on Tuesday as a global bond selloff accelerated, pushing Treasury yields to their highest levels since January 2025. Investors are betting that central banks, including the Federal Reserve, will need to raise interest rates to counter sticky inflation and loose fiscal policy.
U.S. indices fall as bond rout accelerates
The S&P 500 fell 0.7%, the Dow dropped 0.8% and the Nasdaq lost 1% on Tuesday, as a bond selloff that started in Japan spread across global markets. Seven of the S&P 500's sectors declined while four rose; consumer discretionary stocks fell 2% while energy gained 1.5%.
Dell fell 7% during market hours but rose 8% after the bell once it posted record results. Rising oil prices, fueled by the ongoing U.S.-Israeli war on Iran, also weighed on both bonds and stocks, while the dollar gained broadly and the yen fell through 160.00 per dollar, its lowest level since a U.S.-Japan intervention over a month ago.
Yields hit multi-decade highs across Japan and Europe
Japanese government bond yields reached 30-year and record highs across the curve, a level not breached in over 30 years. In the UK, the 10-year gilt yield hit its highest since 2008 and the 30-year its highest since 1998, while French and German yields climbed to multi-year highs. The U.S. 10-year yield rose to 4.80%, its highest since January 2025, and the two-year yield also hit its highest level since January 2025. Oil jumped 5% and gold fell 3% as the moves rippled through commodities.
Fed's Barr signals possible September hike
Fed Governor Michael Barr added his voice on Tuesday to a growing chorus among policymakers that interest rates may have to rise. According to Reuters, Barr said the Fed will have to act "decisively" if inflation doesn't moderate, referring specifically to the Fed's September 15-16 meeting.
Traders are now betting on a hike with a 66% probability versus 34% for a hold, according to Fed Funds futures. That comes on top of three dissents from the Fed's July meeting, making the September decision a close call.
Source: Investing.com
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