Stocks Fall as Fed-Hike Anxiety Lifts Bond Yields: Markets Wrap
(Bloomberg) — The latest bout of weakness in bonds lifted yields to multi-year highs, reducing the appetite for stocks on speculation that a torrid market surge has gone too far amid war-fueled inflation risks.
With oil holding above $100 and no signs of an end to the Iran conflict, Treasury 30-year yields hit levels last seen in 2007 on concern that elevated energy costs are increasing the chances that the next Federal Reserve move will be a hike, not a cut. Equities extended their drop from a record, with the S&P 500 posting its longest losing streak since the end of March.
“The issue of rising bond yields is still something which could create problems for today’s expensive stock market,” said Matt Maley at Miller Tabak.
That’s happening at a time when fund managers increased their allocations to stocks by the most on record, according to a Bank of America Corp. survey. Their exposure came close to triggering a “sell signal,” BofA’s Michael Hartnett said. With 73% respondents long on semiconductor stocks, this was identified as the most-crowded trade.
While conditions for a long and painful downturn may not be in place, the high-profile group of chipmakers has come under intense volatility after a series of records fueled by the revival of the artificial-intelligence frenzy. A key industry gauge closed little changed after sinking 3.6% earlier Tuesday.
Read: SEC Floats Reducing Issuer Disclosures in Push for More IPOs
“Yes, we remain tactically bullish, but we would not be maximally net long given the elevated probability of a pullback led by tech,” said the JPMorgan Market Intelligence desk led by Andrew Tyler, adding dips will likely be bought.
Next up will be Nvidia Corp.’s results due Wednesday after the closing bell.
The giant chipmaker’s earnings should take on greater importance at a time when the market is a bit tired and facing renewed worries about rising bond yields and the possibility of a Fed hike due to a resurgence of inflation, according to Paul Stanley at Granite Bay Wealth Management.
“Investors need some reassurance that the AI story is still alive and well and that the company is producing enough revenue growth to back up its elevated valuation,” he said. “We believe that Nvidia will report financial results that justify its valuation, which is just what the stock market is looking for.”
On the geopolitical front, President Donald Trump threatened to resume strikes on Iran in the coming days as part of the push for a deal to end the war. Meantime, NATO is discussing the possibility of helping ships pass through the Strait of Hormuz if the vital waterway isn’t reopened by early July.
Corporate Highlights:
Alphabet Inc.’s Google is redesigning its iconic search box and adding new artificial intelligence coding tools, the latest steps in the company’s multibillion-dollar campaign to expand influence in the age of AI. Cisco Systems Inc.’s Chief Financial Officer Mark Patterson warned that the company would see “ups and downs” with its gross profit margin as it pushes further into AI infrastructure. Intercontinental Exchange Inc., owner of the New York Stock Exchange, is adding futures contracts for computing power as the market for tracking the price of what’s driving AI technology continues to develop. A key gauge of Home Depot Inc. sales missed expectations in the latest quarter as muted housing demand and high borrowing costs limited consumer spending on improvement projects. Target Corp. has quietly emerged as one of this year’s hottest retail stocks, outperforming many staples and big-box peers. The rally has also raised the bar heading into quarterly results. What Bloomberg Strategists say…
“The jump in Treasury yields is squeezing the compensation for equity risk across major US benchmarks, further dimming the appeal of stocks.”
—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.7% as of 4 p.m. New York time The Nasdaq 100 fell 0.6% The Dow Jones Industrial Average fell 0.6% The MSCI World Index fell 0.4% Philadelphia Stock Exchange Semiconductor Index was little changed Currencies
The Bloomberg Dollar Spot Index rose 0.4% The euro fell 0.4% to $1.1606 The British pound fell 0.3% to $1.3400 The Japanese yen fell 0.1% to 159.05 per dollar Cryptocurrencies
Bitcoin was little changed at $76,783.79 Ether fell 0.2% to $2,110.93 Bonds
The yield on 10-year Treasuries advanced seven basis points to 4.66% Germany’s 10-year yield advanced five basis points to 3.19% Britain’s 10-year yield advanced three basis points to 5.13% The yield on 2-year Treasuries advanced seven basis points to 4.11% The yield on 30-year Treasuries advanced five basis points to 5.18% Commodities
West Texas Intermediate crude fell 0.8% to $107.77 a barrel Spot gold fell 1.9% to $4,481.92 an ounce ©2026 Bloomberg L.P.
