Wall Street Falls as Rising Treasury Yields and U.S. Debt Concerns Shake Markets

Wall Street took a sharp dive Wednesday, weighed down by climbing Treasury yields and growing worries about the U.S. government’s rising debt. After a six-day winning streak, the major indexes stumbled again, signaling renewed investor caution.

The S&P 500 dropped 1.6%, the Dow Jones Industrial Average fell nearly 2% (losing 816 points), and the Nasdaq slipped 1.4%. Early in the day, stocks had only dipped slightly, reacting to mixed profit forecasts from retailers like Target amid ongoing uncertainty around President Donald Trump’s trade policies. But the mood darkened after the U.S. Treasury auctioned $16 billion in 20-year bonds, offering a yield as high as 5.047% to attract buyers.

This move pushed yields higher across the board, including on the closely watched 10-year Treasury note, which jumped from 4.48% Tuesday to 4.59% Wednesday—up significantly from 4.01% just last month. Jonathan Krinsky, chief market technician at BTIG, noted that “bonds finally appear to be getting equities’ attention,” especially as the 30-year Treasury yield surged back above 5%, nearing its highest level since 2023.

The rising yields reflect worries over massive potential tax cuts in Washington, which could add trillions to the national debt. Inflation concerns fueled by Trump’s tariffs also continue to unsettle investors.

This trend isn’t limited to the U.S.; yields on government bonds across developed countries are climbing as governments borrow more and central banks like the Federal Reserve reduce their bond holdings.

Higher Treasury yields have broad effects: They can push up borrowing costs for consumers and businesses—from mortgages to credit cards—potentially slowing economic growth. Meanwhile, higher yields make stocks and other investments less attractive, leading investors to pull back.

Adding to the pressure, Moody’s became the last of the major credit rating agencies to downgrade the U.S. government’s credit rating last week, citing debt sustainability concerns. Bank of America strategists called the downgrade “a wake-up call” for investors who had been ignoring the nation’s fiscal challenges.

Retailers also faced challenges. Target’s shares fell 5.2% after reporting weaker-than-expected earnings and cutting its full-year profit forecast. The company acknowledged setbacks linked to customer boycotts after it scaled back diversity and inclusion efforts earlier this year—a move criticized by both the White House and some conservative groups.

Meanwhile, Carter’s, a baby apparel retailer, saw its stock plunge 12.6% after announcing a dividend cut. CEO Doug Palladini cited expected investments and the risk of rising costs due to proposed new tariffs on imports as reasons for the cut.

Overall, the S&P 500 closed down 95.85 points at 5,844.61, the Dow ended at 41,860.44, and the Nasdaq finished at 18,872.64.

Looking ahead, many companies are grappling with the impact of tariffs and economic uncertainty, making it tough to forecast the year ahead. Some, like Walmart, have already warned they may raise prices to offset tariff costs.

Recently, U.S. stocks had bounced back from earlier losses thanks to tariff delays and rollbacks by the Trump administration. Investors remain hopeful that further trade deals will lead to more permanent tariff reductions.

Overseas, markets showed mixed results. London’s FTSE 100 edged up 0.1% after inflation in the UK hit a year-high in April, while Tokyo’s Nikkei 225 dropped 0.6%, hurt by slower export growth linked to tariffs.