U.S. Stocks Fall as Bond Yields Rise

On Monday, U.S. equity markets closed lower, giving back part of Friday’s sharp rally. The S&P 500 fell -0.43%, the Dow Jones lost -0.77%, and the Nasdaq 100 dropped -0.31%. Rising Treasury yields weighed on sentiment, with the 10-year note yield climbing to 4.28%. At the same time, new tariff measures from the Trump administration heightened concerns about inflation and corporate earnings.

Investors remain cautiously optimistic after dovish remarks from Fed Chair Jerome Powell, who signaled that rising labor market risks may warrant a policy shift. However, doubts persist over how far the Fed can go in cutting rates, as tariffs could reignite inflation. Fed funds futures currently price in an 83% chance of a 25-basis-point rate cut at the September FOMC meeting.

Monday’s economic reports came in mixed. The Chicago Fed national activity index for July fell to -0.19, weaker than expected. Meanwhile, new home sales unexpectedly declined -0.6% to 652,000, though still above forecasts.

The U.S. has broadened tariffs to more than 400 consumer products, including furniture, auto parts, and tableware. Tariffs on Indian imports were also doubled earlier in August. Bloomberg Economics estimates the average U.S. tariff rate could climb to 15.2%, up from just 2.3% in 2024. On the geopolitical side, peace negotiations between Russia and Ukraine remain elusive, with little progress despite U.S. diplomatic efforts.

Furniture makers (RH, Wayfair, Williams-Sonoma), crypto-linked stocks (Coinbase, Marathon Digital, MicroStrategy), and vaccine producers (Moderna, BioNTech, Pfizer) came under heavy pressure. By contrast, semiconductor shares, led by Nvidia, advanced and helped cushion the broader market decline. Casino operators with exposure to Macau also outperformed. Among notable movers: Keurig Dr Pepper plunged -11% after a deal with JDE Peet NV, CSX and Union Pacific weakened after comments from Berkshire Hathaway, while Fabrinet and Dyne Therapeutics rallied on broker upgrades.

In Europe, the Euro Stoxx 50 closed lower, while China’s Shanghai Composite surged +1.51% to a 10-year high. Japan’s Nikkei 225 gained +0.41%. Bond yields in Europe moved higher as well, with Germany’s 10-year bund yield rising to 2.757%.

Investors are awaiting fresh U.S. data on capital goods orders, consumer confidence, and the Fed’s preferred inflation gauge, the PCE index. Nvidia’s earnings report on Wednesday could prove a key catalyst for tech stocks, while later in the week, personal spending and income data will also be closely watched.