U.S. stocks continued their decline during Tuesday's morning session, with the Nasdaq Composite falling 0.6%. Chip stocks, which have been leading the AI-driven rally, faced further selling pressure. Rising U.S. Treasury yields weighed on the major indices. Traders also monitored the oil market following the U.S. President's decision to cancel planned strikes against Iran.
The Dow Jones Industrial Average fell 108.11 points, or 0.22%, to 49,578.01. The Nasdaq Composite dropped 166.70 points, or 0.64%, to 25,924.04. The S&P 500 declined 26.53 points, or 0.36%, to 7,376.52.
The bond market introduced new uncertainty into the bull market, as yields on the 10-year and 30-year U.S. Treasury notes continued to climb after hitting their highest levels since early 2025 in Monday's trading.
Amid heightened investor concerns over accelerating inflation, which has triggered a global bond sell-off, yields on the longest-dated U.S. Treasuries reached their highest levels in nearly two decades. The yield on the 30-year Treasury rose 5 basis points to 5.18% on Tuesday. This level was last seen in 2007, just before the onset of the U.S. financial crisis.
The yield on the 10-year U.S. Treasury note touched 4.569%.
This recent rise in yields follows a series of reports last week indicating a resurgence in inflation, driven by higher oil prices due to the conflict involving Iran. This trend could place additional pressure on consumers and has already led investors to bet that the Federal Reserve's next move this year might be a rate hike, rather than the long-anticipated rate cut.
After weeks of selling, global government bond yields have been pushed to multi-year highs, with this latest move setting new peaks. Fears that war could drive energy prices sharply higher and concerns over fiscal deficits have led investors to demand higher compensation for holding long-term bonds.
Ajay Rajadhyaksha, Chairman of Global Research at Barclays, wrote in a report on Monday, "With debt growing faster than the economy, inflation dynamics worsening, and little political will for fiscal reform, there is not much reason to bet on long bonds."
Technology stocks were broadly lower. Shares of Micron Technology fell 2%, potentially marking a fourth consecutive day of declines, as concerns grew that the AI-fueled boom for memory chipmakers may have advanced too rapidly.
Despite this, Micron's stock is still up more than 138% year-to-date. The stock fell on Monday following a 7% drop in shares of competitor Seagate Technology, which had issued a warning about its ability to meet demand. Seagate shares also declined on Tuesday.
The Philadelphia Semiconductor Index fell 6% over two days, as investors took profits amid worries about valuations and the sustainability of massive data center spending.
NVDA 3xLongSG261006 is scheduled to report its fiscal first-quarter earnings after the market closes on Wednesday. The stock extended its recent slide in Tuesday morning trading, on track for a third consecutive day of losses.
Jed Ellerbroek, Portfolio Manager at Argent Capital Management, stated, "This is a well-deserved breather after an epic run. The timing of this reversal is interesting because it's happening just days before the world's largest chip stock is set to report great earnings and guidance."
Oil prices fell on Tuesday after the U.S. President announced Monday night that he had canceled plans to strike Iran following requests from leaders of three major Middle Eastern nations to "stand down."
In early Tuesday trading, West Texas Intermediate crude futures fell 0.4% to $103.81 per barrel. Brent crude declined 1% to $110.96 per barrel. The President's post also helped the S&P 500 and Nasdaq recoup some losses late Monday, but both indices still closed lower for a second consecutive day.
Prior to the last few sessions, the stock market had been on a strong run, with the S&P 500 and Nasdaq hitting record highs last week and the Dow Jones Industrial Average briefly reclaiming the 50,000-point level. However, Kevin Gordon, Head of Macro Research & Strategy at the Schwab Center for Financial Research, believes the market's most spectacular days of gains are behind it.
Kevin Gordon said, "Looking at positioning and stretched indicators, it probably means you're not going to see the same kind of sharp rally that you saw near the March lows."
On the economic data front Tuesday, preliminary estimates from ADP Research and the Stanford Digital Economy Lab showed that U.S. private sector payrolls grew by an average of 42,250 per week in the four weeks ending May 2. ADP's previously reported monthly change in employment for April was an increase of 109,000 jobs. ADP and the Stanford Digital Economy Lab launched the weekly employment data release on October 28.
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