Wall Street tumbles under the weight of rising Treasury yields and US
debt worries
[May 22, 2025] By
STAN CHOE
NEW YORK (AP) — Wall Street slumped on Wednesday under the weight of
pressure from the bond market, where Treasury yields climbed on worries
about the U.S. government’s spiraling debt and other concerns.
The S&P 500 fell 1.6% for a second straight drop after breaking a
six-day winning streak. The Dow Jones Industrial Average lost 816
points, or 1.9%, while the Nasdaq composite sank 1.4%.
Stocks had been drifting only modestly lower early in the day, after
Target and other retailers gave mixed forecasts for upcoming profits
amid uncertainty caused by President Donald Trump’s trade war. The
market then turned sharply lower after the U.S. government released the
results for its latest auction of 20-year bonds.
The government regularly sells such bonds, which is how it borrows money
to pay its bills. In this auction, the U.S. government had to pay a
yield as high as 5.047% to attract enough buyers to lend it a total of
$16 billion over 20 years.
That helped push up yields for all kinds of other Treasurys, including
the more widely followed 10-year Treasury. Its yield climbed to 4.59%
from 4.48% late Tuesday and from just 4.01% early last month. That’s a
notable move in the bond market.
“Bonds finally appear to be getting equities’ attention,” according to
Jonathan Krinsky, chief market technician at BTIG, pointing in
particular to the 30-year Treasury yield, which jumped back above 5% and
approached its highest level since 2023.
Treasury yields have been on the rise in part because of concerns that
tax cuts currently under consideration in Washington could pile
trillions of more dollars onto the U.S. government’s debt. Concerns are
also still brewing about how much Trump’s tariffs will push up on
inflation in the United States.
The U.S. government’s bonds aren’t alone, and yields have been on the
rise recently for developed economies around the world. That’s partly
because their governments are continuing to borrow more cash to pay
their bills, while central banks like the Federal Reserve have cut back
on their own holdings of government bonds.
When the U.S. government has to pay more interest to borrow money, that
can cause interest rates to rise for U.S. households and businesses too,
including for mortgages, auto loans and credit cards. That in turn can
slow the economy. Higher yields can also make investors less inclined to
pay high prices for stocks and other kinds of investments.
Moody’s Ratings became the last of the three major ratings agencies late
last week to downgrade the U.S. government’s credit rating on concerns
that it may be heading toward an unsustainable amount of debt.
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Trader Michael Conlon works on the floor of the New York Stock
Exchange, Tuesday, May 20, 2025. (AP Photo/Richard Drew)
 “We do not think that the downgrade
matters by itself,” Bank of America strategists wrote in a BofA
Global Research report, “but it has served as a wake up call for
those investors who had been ignoring the ongoing fiscal
discussion.”
On Wall Street, Target sank 5.2% after the retailer reported weaker
profit and revenue than analysts expected for the start of the year.
The company said it felt some pain from boycotts by customers. It
scaled back many diversity, equity and inclusion initiatives early
this year following criticism by the White House and conservative
activists, which drew its own backlash. Perhaps more worryingly for
Wall Street, Target also cut its forecast for profit over the full
year.
Carter’s, which sells apparel for babies and young children, sank
12.6% after cutting its dividend.
CEO Doug Palladini said the company made the move in part because of
investments it anticipates making in upcoming years, as well as the
possibility that it “may incur significantly higher product costs as
the result of the new proposed tariffs on products imported into the
United States.”
All told, the S&P 500 fell 95.85 points to 5,844.61. The Dow Jones
Industrial Average fell 816.80 to 41,860.44, and the Nasdaq
composite dropped 270.07 to 18,872.64.
A growing number of companies have recently said tariffs and
uncertainty about the economy are making it difficult to guess what
the upcoming year will bring. Others, including Walmart, have said
they’ll have to raise prices to offset Trump’s tariffs.
U.S. stocks had recently recovered most of their steep losses from
earlier in the year after Trump delayed or rolled back many of his
stiff tariffs. Investors are hopeful that Trump will lower his
tariffs more permanently after reaching trade deals with other
countries.
In stock markets abroad, indexes were mixed amid mostly modest
movements across Europe and Asia
London’s FTSE 100 rose 0.1% after a report said inflation in the
United Kingdom spiked to its highest level for more than a year in
April. Tokyo’s Nikkei 225 fell 0.6% after a report said Japan’s
exports have slowed due to tariffs
___
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
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