Technology Stocks Slide as Bond Selloff Rolls On: Markets Wrap

(Bloomberg) — Technology stocks drove declines in global equities as long-dated bond yields pushed further into multidecade highs and oil prices extended their climb, draining traders’ appetite for risky assets.

The S&P 500 headed for a third straight day of losses as index futures retreated 0.5%. Yields on 30-year government bonds continued to climb across the world, with those on Treasuries up two basis points to 5.32%, the highest since 2007. US crude topped $85 a barrel as tensions in the Middle East showed no sign of easing. The dollar was little changed while gold declined.

August’s rebound in chipmakers faltered, with an exchange-traded fund tracking semiconductor stocks sliding 3.6% in premarket trading. Nvidia Corp. dropped 1.9%. Software shares were a relative bright spot. Nasdaq 100 futures fell 1.3%.

Equity markets are struggling under the weight of rising borrowing costs as bond investors demand higher premiums to finance spendthrift governments and shield against persistently sticky inflation. Elevated oil prices have also reinforced expectations that central banks will need to tighten monetary policy.

“The Middle East is clearly re-escalating again and long-term interest rates are rising, and these are things that end up corroding the value of equities,” said Emma Moriarty at CG Asset Management. “And in a market where it’s summertime, liquidity is a little bit thinner, it’s a bit more prone to volatility.”

In Europe, French 30-year yields hit their highest since 2008, while their UK peers were approaching 6%. Germany’s borrowing costs hit a 15-year high in a major sale of long-dated bonds. The Stoxx 600 equity index headed for a fifth straight day of losses, the longest such stretch this year.

What Bloomberg Strategists Say:

“AI-related spending will continue to be a feature of corporate fundraising in the coming months, which will keep longer-dated Treasuries — and highly correlated German bonds and gilts — under pressure. And the longer that yields stay higher, the worse the outlook for equities.”

— Ven Ram, cross-asset strategist. For the full note, click here.

Yardeni Research warned investors are becoming more concerned about the surge in borrowing by AI hyperscalers and questioning whether the Fed will remain sufficiently vigilant on inflation if oil prices climb again.

“We aren’t pushing the panic button,” strategists led by Ed Yardeni noted. “However, we are closely monitoring whether the bond vigilantes might do so.”

Events in the Middle East will remain a key point of focus as both the US and Iran show less willingness to compromise. President Donald Trump said he won’t try to revive a stalled truce with the Islamic Republic, dimming prospects for a swift reopening of the Strait of Hormuz.

For Mohit Kumar at Jefferies, there is “no easy way out” and “further pain in the near term” for energy costs.

“We have stayed away from the long end of the curve and rates duration and instead focus on steepeners,” he wrote. “We see no reason to change our portfolio.”

Traders expect tech-stock volatility to continue as investors shift their focus back and forth between robust earnings and worries over whether debt-fueled infrastructure investment will deliver sufficient returns to justify the spending.

“You are going to get winners and losers and you’re going to get a lot of wasted capex,” said Justin Onuekwusi, chief investment officer at St. James’s Place. “That, to me, is a huge future challenge.”

Corporate Highlights:

Goldman Sachs Group Inc. struck its second deal in a week as the firm pushes ahead with plans to grow its $4 trillion money-management arm. Home Depot Inc.’s results beat estimates in the latest quarter, a sign that spending on improvement projects is holding up despite high borrowing and housing costs. Xiaomi Corp. posted profit that fell less than expected, raising hopes it can weather a persistent memory shortage that’s weakened demand for smartphones. BHP Group’s profit rose by almost a third as buoyant commodity prices lifted earnings, with full-year revenue from copper overtaking iron ore for the first time. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.5% as of 8:26 a.m. New York time Nasdaq 100 futures fell 1.3% Futures on the Dow Jones Industrial Average were little changed The Stoxx Europe 600 fell 0.4% The MSCI World Index fell 0.2% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1578 The British pound fell 0.1% to $1.3530 The Japanese yen fell 0.1% to 159.65 per dollar Cryptocurrencies

Bitcoin fell 0.2% to $64,256.12 Ether fell 0.3% to $1,899.84 Bonds

The yield on 10-year Treasuries advanced one basis point to 4.73% Germany’s 10-year yield advanced three basis points to 3.25% Britain’s 10-year yield advanced one basis point to 5.07% Commodities

West Texas Intermediate crude rose 0.8% to $85.21 a barrel Spot gold fell 0.5% to $4,395.34 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Subrat Patnaik, Tasos Vossos and Sujata Rao.

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