Stocks Hit by Tech Rout as US Yields Climb Again: Markets Wrap

A selloff in the world’s largest technology companies weighed heavily on stocks, while Treasury yields climbed once again amid bets the Federal Reserve will take a more measured approach on rate cuts.

Equities extended losses into a third straight day, with the S&P 500 down about 1% and the Nasdaq 100 falling nearly twice as much. Nvidia Corp. led megacaps lower. Apple Inc. sank as a closely followed analyst said iPhone 16 orders were cut by about 10 million units from the fourth quarter through the first half of 2025. As Tesla Inc. gets ready to report its results, Wall Street will be watching for signs that slowing sales are close to a trough.

Investors face a number of risks that could be making them less willing to jump into the market. The next three weeks capture big tech earnings, October’s payrolls report, and the US election, followed by the Fed meeting. In another sign of Wall Street’s skittishness, the term premium on 10-year Treasury notes — an expression of the extra yield investors demand for owning the debt rather than rolling over shorter-term securities — hit the highest since November.

“This is about price exhaustion, this is about election exhaustion, it’s about campaign exhaustion, it’s about Fed exhaustion, it’s about policy exhaustion, it’s about geopolitical exhaustion,” said Kenny Polcari at SlateStone Wealth. “It’s about how stocks are stretched and it’s about the need for stocks to retreat, test lower, shake the branches, see who falls out and then move on.”

The S&P 500 broke below 5,800. The Nasdaq 100 dropped 1.8%. The Dow Jones Industrial Average slipped 1%. Boeing Co. slid after signaling the company’s woes will take time to fix. Qualcomm Inc. got hit as Arm Holdings Plc canceled a license that allowed the company to use Arm’s intellectual property to design chips. Texas Instruments Inc. climbed after its results.

Treasury 10-year yields rose three basis points to 4.23%. A $13 billion sale of 20-year bonds tailed at the highest yield since May. The dollar rose against all of its Group-of-10 peers, on pace for its best month since 2022. The yen hit the lowest in almost three months, reviving concern that Japan may intervene. The loonie slid after the Bank of Canada stepped up the pace of easing. 

Oil dropped as US crude inventories rose and the Biden administration renewed efforts to secure a cease-fire in the Middle East. Gold declined from a record.

To Jonathan Krinsky at BTIG, equities are finally noticing the moves in bonds and the dollar. That’s a stark contrast to the action in the last couple of weeks, with the bullish narrative being that bonds were re-pricing to where they should be based on the stronger-than-anticipated economy, he noted. 

“While that might be fair in the big picture, markets are always concerned with the velocity of the move rather than the overall level, and the fact that stocks didn’t flinch in the face of those moves suggested complacency,” Krinsky said. “Whether this is the start of the pre-election jitters or not, we continue to see downside risk for equities broadly over the coming weeks, with an SPX pullback into the 5,500-5,650 zone a decent probability.”

The price of options that protect against an extended slump in Treasuries has soared to the highest this year amid concerns that losses may deepen.

Meantime, swap prices reflect less than a 100% certainty that the central bank reduces rates at each of its two remaining policy meetings this year. The bond market is also trimming bets on the degree of Fed rate reductions over the next year.

“The price of options to hedge against Treasury losses is soaring,” said Andrew Brenner at NatAlliance Securities. “In the US, it is about the election and potential sweep. That is what is being built into the rate structure, which is giving the vigilantes the green light. It will reverse, but it might take a severe employment number or a surprise in the election.”

“We would caution investors from reading too much into the recent rise in bond yields,” said Tiffany Wilding at Pacific Investment Management Co. “Over the past six major Fed rate-cutting cycles, the change in the 10-year Treasury yield a month after the first cut has not provided a consistent signal about the magnitude of further cuts or whether the Us economy falls into recession.”

In fact, yields rose in the month after the first cut more often than not, she noted.

“Equity market performance in the first month after the Fed starts cutting has been a similarly bad predictor of future economic performance ,” Wilding said. “Equities, more often than not, have tended to rise in the month after a cutting cycle begins, despite more significant divergence as time goes on.”

Looking at the same starkly different cycles of 1995 and 2007, equity returns in the month after the first cut were positive in both cycles , Wilding said. However, equity market performance was down 4.4% in the year after the 2007 cut, while it was up 21% in the year following the 1995 adjustment.

“Even with the recent move in 10-year Treasury yields, we remain bullish on US large caps,” said Nicholas Colas at DataTrek Research. “History says to discount the idea that rates will blow out because of deficit worries, at least over the near term. Instead, we see higher yields as a sign that economic growth remains robust and corporate earnings growth should continue over the coming quarters.”

“All else equal, the more rate cuts that are removed for next year the less of an outlier reading it becomes for the market to achieve 15% earnings growth,” said Ryan Grabinski at Strategas. “However, additional rates cuts do not change the challenges the S&P faces with achieving that growth rate.” 

Sales growth continues to show signs of slowing, and if analysts were suggesting rate cuts would reduce interest expense, that argument is beginning to recede, Grabinski said. 

“Nearly 14% EPS margins continue to look more and more difficult to achieve,” he added. “The question is when does something give.”

To Jose Torres at Interactive Brokers, the equity market is extremely fragile considering the headwinds that are lurking right around the corner.

“Earnings expectations are buoyant for next year, which increases the importance of forward guidance rather than past results,” he said. “When considering that valuations are around 22 times next year’s profits, any disappointment in the outlook for the bottom line can significantly impact stock market performance.”

Some of the main moves in markets:

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