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US Equity Indexes Drop as Fiscal Concerns Send Treasury Yields Sharply Higher

1:45 PM ET 05/21/2025 - MT Newswires

The Nasdaq Composite fell 0.6% to 19,026.1, the S&P 500 declined 1% to 5,881.4, and the Dow Jones Industrial Average dropped 1.6% to 41,980.5. The communications services sector was the sole gainer intraday. Real estate, and healthcare and financials led the decliners.

The yields on 30-year and 10-year US Treasury bonds rebounded above key thresholds that roiled markets in April after President Donald Trump's tariff announcements. The 30-year yield traded at 5.07% and the 10-year yield was at 4.58% intraday.

BofA Securities analysts said they "do not think that the [US sovereign credit rating] downgrade [by Moody's Investors Service on Friday] matters by itself, but it has served as a wakeup call for those investors who had been ignoring the ongoing fiscal discussion."

House Republicans are girding for a vote on a messy budget reconciliation bill as soon as Wednesday night or Thursday, according to a note from Scotiabank.

"They still can't agree on the combination of tax cuts, spending cuts, and SALT deductions but are seeking to do so before heading off for the Memorial Day weekend," Derek Holt, head of capital market economics, said in the note. "If it passes in the House, then it's unlikely to pass in the Senate absent big modifications."

The ICE US Dollar Index, which measures the greenback's performance against the world's major currencies, retreated 0.7% to 99.46.

Gold futures advanced 0.8% to $3,309.11 per ounce.

In company news, Target's (TGT) fiscal Q1 results fell more than estimated while the retailer slashed its full-year outlook, citing the impact of tariffs and uncertain consumer spending. Shares dropped 4.1% intraday.

Lowe's (LOW) maintained its full-year outlook on Wednesday as Q1 earnings and comparable sales fell less than forecast. Shares declined 1.5% intraday.

TJX (TJX) affirmed its full-year outlook on Wednesday following better-than-expected Q1 revenue and said it will be able to mitigate the impact of tariffs. Shares of the discount retailer slid 2.7% intraday.

Alphabet's (GOOG, GOOGL) Google is rolling out an "AI Mode," which answers queries in a chatbot-style conversation, Chief Executive Sundar Pichai said Tuesday. The option is being added as a tab within search and initially for US users. Shares jumped 3.2% intraday, the top gainer on the S&P 500 and the Nasdaq.

West Texas Intermediate crude oil futures slipped 0.1% to $61.99 a barrel.

In economic news, the unemployment rate rose in three states and Washington, DC, fell in two and held steady elsewhere in April, the Bureau of Labor Statistics reported on Wednesday. The largest unemployment rate gains were in Massachusetts and the District of Columbia.