US stocks stumbled on Wednesday as rising bond yields put pressure on equities, with Wall Street increasingly concerned about the growing US debt. The market reacted negatively to weak demand at a bond auction and the ongoing uncertainty surrounding President Trump’s tax bill and the ballooning deficit.
Bond Yields Surge as Stocks Struggle
The Dow Jones Industrial Average (^DJI) dropped more than 1.9%, or about 800 points, while the S&P 500 (^GSPC) slid by 1.6% and the Nasdaq Composite (^IXIC) fell roughly 1.4%. The losses followed a weak 20-year bond auction that triggered a rise in Treasury yields, with the benchmark 10-year Treasury yield (^TNX) reaching 4.59%, its highest level since 2023.
Growing Concerns Over US Debt and Tax Bill
Markets are reassessing a recent rally, as the S&P 500 snapped a six-day streak of gains. The boost from the surprise US-China trade truce quickly faded, giving way to growing concerns about the US deficit. Republican leaders are preparing President Trump’s tax-and-spending bill for a House vote, which is fueling anxieties about how the increasing debt burden will be addressed.
US-China Tensions Over Chips Reignite
In addition to the growing debt concerns, the US-China trade war has resurfaced, this time over Huawei’s AI chips. The Trump administration’s warnings against using these chips have undermined the recent trade discussions in Geneva, leading China to accuse the US of sabotaging the fragile trade deal. This has reignited fears of economic fallout from deteriorating US-China relations.
Target Misses Earnings, Currency Woes Intensify
Retailer Target’s first-quarter results were in focus, as the company missed earnings estimates and cut its full-year outlook. Despite Trump’s push for retailers to absorb the costs of tariffs, Target’s top executives declined to say whether they would follow Walmart’s lead in raising prices to offset these costs. Meanwhile, concerns about currency fluctuations added to the market’s woes, with the US dollar hitting a two-week low. Traders are keeping a close eye on the ongoing G-7 meeting, looking for signs that the Trump administration may favor a weaker currency to boost exports.
