The Dow Jones Industrial Average plunged 817 points on Wednesday. This was the worst day for the market in a month. The S&P 500 fell 1.61% and the Nasdaq Composite dropped 1.41%.
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The sell-off came after a disappointing auction for 20-year Treasury notes. The auction settled with a high yield of 5.047%. This was higher than the 4.83% yield at the last 20-year auction.
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The weak demand indicates that investors want higher rates to hold US debt. Wall Street is worried about President Trump’s tax bill adding to the federal deficit. Moody’s recently downgraded the United States’ credit rating from Aaa to Aa1.
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This has raised concerns about the safe-haven status of American assets.
Dow slides on treasury auction results
Treasury yields have been pushed higher as a result.
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The yield on the 10-year Treasury note rose to 4.59%, its highest level since February. The yield on the 30-year Treasury exceeded 5%, its highest since 2023. “Although Moody’s decision to downgrade the US’s sovereign credit rating from Aaa to Aa1 was unsurprising, it does add focus on the real issues at hand: the US’s growing deficit and debt burden,” said Chip Hughey, managing director for fixed income at Truist Advisory Services.
The ratio of federal debt to gross domestic product (GDP) was 123% in 2024, up from 104% in 2017, according to the Treasury Department. “We’re now talking about deficits and a national debt-to-GDP ratio that are really going to be unprecedented, except for recent recessionary times,” noted Alan Auerbach, a professor of economics at UC Berkeley. Despite the market turbulence, the S&P 500 had previously rebounded 17% from its lowest point this year.
The CBOE Volatility Index, known as Wall Street’s fear gauge, surged more than 15% on Wednesday. The US dollar index slid by 0.5%. Bitcoin hit an all-time record high above $109,400 before paring gains and trading around $107,000.
The cryptocurrency has surged more than 40% since dropping below $75,000 in early April.
