The U.S. stock market suffered significant losses on Wednesday as major indexes fell sharply. The Dow Jones Industrial Average lost 816.80 points, or 1.91%, to close at 41,860.44. The S&P 500 shed 1.61% to 5,844.61, while the Nasdaq Composite slid 1.41% to 18,872.64.
The sell-off was triggered by a surge in Treasury yields as traders grew increasingly worried that a new U.S. budget bill would exacerbate the country’s already significant deficit. The yield on the 10-year Treasury note last traded around 5.09%, the highest level since October 2023. Sam Stovall, CFRA Research chief investment strategist, said, “The question now is, from a fiscal perspective, what will the tax bill look like, and will it undo all of the recent fiscal frugality by raising the debt level at a slower rate?
That’s why the 10-year yield is moving higher — because investors are worried that we’re not doing enough to reduce the debt.”
The market action came after the major averages had shown resilience, with the S&P 500 ending a six-day winning streak and the Nasdaq seeing its first negative day in three.
Stock market faces sharp decline
Despite the recent decline, the S&P 500 and Nasdaq have rebounded sharply since a sell-off last month, gaining more than 13% and 18%, respectively, over the past month.
Shares of Target dropped 5.2% after the retailer cited tariff uncertainty and backlash to its diversity, equity, and inclusion efforts. Boeing was the worst-performing Dow member, losing 5.8%. Nike shares fell more than 4% as reports indicated that the sneaker giant is planning to hike prices on some products in response to tariffs.
Christopher J. Waller, an influential governor at the Federal Reserve, said on Thursday that financial markets were looking for more “fiscal discipline” from Washington, warning that investors are likely to continue to demand higher yields in order to hold U.S. assets. We ran $2 trillion deficits the last few years — this is just not sustainable, and so the markets are looking for a little more fiscal discipline,” he said in an interview with Fox Business.
“They’re concerned.”
Despite the day’s losses, Piper Sandler suggested that a “healthy pause” is more likely than a significant pullback, recommending investors seek out buying opportunities during minor sell-offs.
