U.S. Stocks Fall as Treasury Yields Hit Multi-Week Highs

U.S. stocks closed lower on Tuesday as rising Treasury yields weighed on sentiment. The S&P 500 fell 0.69%, the Dow Jones slipped 0.55%, and the Nasdaq 100 lost 0.79%. Futures on both the S&P and Nasdaq also declined around 0.7%. The 10-year Treasury yield jumped 5 basis points to 4.28%, sparking a wave of risk-off moves across markets.

Weaker-than-expected U.S. data reinforced investor caution. The August ISM manufacturing index rose only to 48.7, missing forecasts of 49, while the prices paid sub-index fell to a six-month low. July construction spending declined for a third straight month. This week’s calendar is packed, with JOLTS job openings, factory orders, the Fed’s Beige Book, and the key August jobs report all on tap. Economists expect just 75,000 new payrolls and a rise in unemployment to 4.3%.

A federal appeals court ruled the Trump administration exceeded its authority when imposing global tariffs, though the measures remain in place pending a Supreme Court decision. Bloomberg Economics estimates the average U.S. tariff could rise to 15.2% from 2.3% in 2024 before the announcements.

Fed funds futures price in a 92% chance of a September 25 bp rate cut, with 51% odds of another cut in October. Meanwhile, supply concerns added pressure, with $55 billion in corporate bonds hitting the market this week. European yields also surged: German bunds climbed to a five-month high, and U.K. gilts hit a 7.5-month peak.

Eurozone August CPI rose 2.1% y/y, in line with expectations, while core inflation came in at 2.3%, slightly above forecasts. ECB officials signaled little appetite for rate cuts, citing persistent inflation risks.

Mega-cap tech dragged markets lower, with Nvidia, Amazon, Apple, and Tesla all losing over 1%. Semiconductor stocks slumped, with ARM off 4% and Lam Research and KLA down more than 3%.

Corporate highlights included Kraft Heinz plunging 6% after announcing a split, Constellation Brands cutting guidance, and Block downgraded by BNP Paribas. On the upside, biotech names soared: Cytokinetics, Ionis Pharma, and United Therapeutics jumped 30%–40% on positive trial results. Biogen rose 5% on FDA approval for its Alzheimer’s drug, while Air Lease gained 7% after a $7.4 billion takeover deal. PepsiCo added over 1% on reports Elliott Management built a $4 billion stake.

Rising yields and tariff risks continue to undermine equity sentiment. With the Fed poised to ease policy but bond markets flashing warning signs, investors are bracing for this week’s labor data to set the tone for September trading.