Wall Street's retreat deepened Tuesday, with the S&P 500 closing at 7,691.76, down 53.30 points, or 0.69%, for its third consecutive loss since notching an all-time high last Thursday. The Dow Jones Industrial Average slipped 116.38 points, or 0.22%, to 53,343.40, while the technology-heavy Nasdaq Composite dropped 355.20 points, or 1.33%, to 26,289.71 as chipmakers gave back recent gains.
The semiconductor-focused PHLX index fell as much as 5% intraday, its worst session in more than two weeks. Intel slid 6%, Micron lost 5%, and Nvidia, AMD, Broadcom and Applied Materials each dropped between 2% and 6%. The pullback came even as enthusiasm for artificial-intelligence infrastructure spending continued to run high, underscoring investor anxiety that lofty chip valuations leave little room for disappointment.
Yields Climb to Levels Unseen Since 2007
The more consequential move played out in the bond market. The 30-year Treasury yield touched an intraday high of 5.33% before settling near 5.30%, its highest close in 19 years, as investors demanded greater compensation to hold long-dated government debt. The 10-year yield eased slightly to 4.70% after topping 4.72% a day earlier.
Strategists pointed to a widening federal deficit, heavy Treasury issuance and fading foreign demand as the drivers, rather than inflation alone. The U.S. fiscal shortfall reached $432.3 billion in July, its largest monthly gap since March 2021, pushing the year-to-date deficit to nearly $1.8 trillion as the national debt approaches $40 trillion.
Long-term yields look likely to push up to 5.60% to 5.70% and likely move up at a quicker pace than normal.
Mark Newton, technical strategist, Fundstrat
The bond selloff has unfolded on the watch of new Federal Reserve Chair Kevin Warsh, who was sworn in in May, with markets now pricing roughly a 31% probability of a rate increase at the Fed's September meeting — up from levels near zero before July inflation data came in hot.
Oil Extends Its Climb as the Fed's Next Move Comes Into Focus
Adding to the pressure, Brent crude pushed toward $92 a barrel in early Wednesday trading, its fourth straight session of gains, after the 60-day negotiating window in the U.S.-Iran memorandum of understanding over the Strait of Hormuz expired Monday without a settlement. President Trump said no talks with Tehran were under way while insisting the strait remains open; Iran maintains it is closed.
Investors now turn to the Federal Reserve's minutes from its July meeting, due at 2 p.m. ET Wednesday, which are expected to detail an unusual three-way dissent by regional bank presidents pushing for a rate hike — the first split of its kind since 2016. Also on deck before the opening bell: earnings from Target, TJX and Lowe's, the latest test of consumer resilience after U.S. retail sales fell 0.6% in July, their steepest monthly drop in more than a year.
Traders said the combination of higher energy costs, rising long-term borrowing costs and a still-undecided Fed leaves little room for error heading into the back half of the week. Whether retailers can show consumers are still spending, and whether the Fed minutes soften or harden rate-hike bets, will likely set the tone for trading into the holiday-shortened weeks ahead.
