Global Bond Selloff Weighs on Stocks

The S&P 500 Index ($SPX) (SPY) is down by -0.44% today, the Dow Jones Industrial Average ($DOWI) (DIA) is down by -0.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -0.96%.  E-mini S&P futures (ESU26) are down -0.46%, and September E-mini Nasdaq futures (NQU26) are down -0.98%.

Stock indices are trading lower today, with the S&P 500 falling to a 4-week low and the Dow Jones Industrials and the Nasdaq 100 posting 1-week lows.   Stocks are sliding as rising oil prices boost inflation expectations and ramp up expectations that global central banks will keep raising interest rates.  Investors are demanding higher yields to hold bonds as concerns intensify about persistent inflation, government spending, and surging corporate borrowing to finance the AI buildout.  The higher bond yields have sparked a retreat in chipmakers and AI-infrastructure stocks today.

Today’s global bond sell-off has pushed bond yields to multi-year highs and is undercutting stocks.  The UK 10-year Gilt yield soared to an 18-year high of 5.25%, the German 10-year Bund yield jumped to a 15-year high of 3.36%, the Japanese 10-year JGB bond yield surged to a 30-year high of 3.00%, and the 10-year T-note yield rose to a 1.75-year high of 4.80%. 

Stocks maintained their losses today on weaker-than-expected US economic news, including Aug ISM manufacturing, July construction spending, and July JOLTS job openings.

The US Aug ISM manufacturing index fell -1.0 to 54.6, weaker than expectations of 55.2.  The Aug ISM prices paid sub-index was unchanged at 71.1, stronger than expectations of a decline to 70.8.

US July construction spending fell -0.5% m/m, weaker than expectations of no change.

The US July JOLTS job openings unexpectedly rose +89,000 to 7.271 million from a downward revised 7.182 million in June, weaker than expectations of 7.313 million.

Hawkish comments today from Fed Governor Michael Barr were bearish for stocks and bonds when he said, "If inflation appears not to be moderating sufficiently, then I think we should act decisively to raise interest rates."

Oct WTI crude oil prices (CLV26) are up more than +2% today to a 6-week high as Middle East hostilities escalate.  Late Monday, two oil supertankers were struck by projectiles while attempting to exit the Strait of Hormuz.  Also on Monday, the US struck Iranian rocket launchers preparing to send mines into the Strait of Hormuz, and Iran retaliated by firing missiles and drones at US air bases in Jordan, while the United Arab Emirates said it intercepted drones from Iran.  Axios reported that President Trump is weighing limited strikes against Iran to prevent it from reconstituting its radar and missile capabilities to attack ships in the Strait of Hormuz. 

Q2 earnings results are a bullish factor for stocks.  The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and nearly four times the average earnings growth rate outside of the Covid period since Q4 of 2013, according to Bloomberg Intelligence.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2. So far, earnings results have been positive, with 86% of the 486 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 65% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets are lower today.  The Euro Stoxx 50 fell to a 1-month low and is down -0.73%. China's Shanghai Composite fell from a 7-week high and closed down -0.16%.  Japan's Nikkei-225 Stock Average closed down -0.15%.

Interest Rates

December 10-year T-notes (ZNZ6) are down -4 ticks today.  The 10-year T-note yield is up +1.2 bp to 4.762%.  T-notes dropped to a 1.75-year nearest-futures low today, and the 10-year T-note yield rose to a 1.75-year high of 4.796%.  T-notes are under pressure from today’s +2% jump in WTI crude oil prices to a 6-week high, which boosts inflation expectations and is hawkish for Fed policy.  T-notes are also being pressured by negative carryover from last Friday, when hawkish comments from Fed Chair Warsh pushed the chances of a Fed rate hike at next month’s FOMC meeting up to 65% today from 36% before he spoke. 

T-notes recovered from their worst level today after weaker-than-expected US economic news on Aug ISM manufacturing, July construction spending, and July JOLTS job openings sparked short covering in T-notes.

European government bond yields are moving higher today.  The 10-year German bund yield rose to a 15-year high of 3.364% and is up +0.8 bp to 3.332%.  The 10-year UK gilt yield surged to an 18-year high of 5.250% and is up +13.6 bp to 5.199%.

The Eurozone Aug CPI rose +3.3% y/y, in line with expectations and the largest increase in nearly 3 years.  Aug core CPI rose +2.4% y/y, weaker than expectations of +2.5% y/y.

The Eurozone July unemployment rate was unchanged at 6.4%, showing a slightly weaker labor market than expectations of 6.3%.

The Eurozone Aug S&P manufacturing PMI was revised downward by -0.1 to 52.7 from the previously reported 52.8.

German July retail sales unexpectedly fell by -3.4% m/m, weaker than expectations of +0.5% m/m and the biggest decline in 5 years.

ECB Governing Council member Martin Kocher said, "Upside risks to inflation have increased again recently.  If this picture is confirmed in the ECB's new forecast, I believe another interest rate hike will be necessary in the near future."

The UK Aug S&P manufacturing PMI was revised upward by +0.2 to 51.7 from the previously reported 51.5.

Markets are discounting a 98% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

US Stock Movers

Chipmakers and AI-infrastructure stocks are retreating today amid the surge in bond yields.  Qualcomm (QCOM), Lam Research (LRCX), Advanced Micro Devices (AMD), and KLA Corp (KLAC) are down more than -3%, and Applied Materials (AMAT), Analog Devices (ADI), Microchip Technology (MCHP), Marvel Technology (MRVL), ASML Holding NV (ASML), and Texas Instruments (TXN) are down more than -2%. 

Cybersecurity stocks are weaker today, weighing on the broader market.  CrowdStrike Holdings (CRWD) is down more than -6% to lead losers in the S&P 500 and the Nasdaq 100.  Also, Palo Alto Networks (PANW) and SentinelOne (S) are down more than -5%, and Okta (OKTA), Fortinet (FTNT), and Zscaler (ZS) are down more than -4%, and Cloudflare (NET) is down more than +3%. 

Cryptocurrency stocks are sliding today, with Bitcoin (^BTCUSD) down nearly -1%.  Riot Platforms (RIOT) is down more than -5%, and Circle Internet Group (CRCL) and MARA Holdings (MARA) are down more than -3%.  Also, Coinbase Global (COIN), Galaxy Digital Holdings (GLXY), Strategy (MSTR), and Iren Ltd (IREN) are down more than -2%. 

Defensive health insurance stocks are climbing today, with the slump in the broader market.  Humana (HUM) and CVS Health Corp (CVS) are up more than +3%, and Elevance Health (ELV), Centene (CNC), Cardinal Health (CAH), the Cigna Group (CI), and Molina Healthcare (MOH) are up more than +2%.  Also, UnitedHealth Group (UNH) and Universal Health Services (UHS) are up more than +1%. 

Amazon.com (AMZN) is down more than -2% to lead losers in the Dow Jones Industrials after the US Federal Trade Commission and a group of US states sued the company over claims it overcharged advertisers by more than $20 billion since 2019.

Fervo Energy (FRVO) is up more than +23% on a Wall Street Journal report that said the company has signed a deal to sell power to Alphabet’s Google. 

Duolingo (DUOL) is up more than +5% after Evercore ISI upgraded the stock to outperform from in line with a price target of $210.   

Howmet Aerospace (HWM) is up more than +3% to lead gainers in the S&P 500 after Citigroup said Monday’s selloff in the stock was “overblown,” and maintains its buy rating on the stock.

Earnings Reports (9/1/2026)

Credo Technology Group Holding (CRDO), Dell Technologies Inc (DELL), Gitlab Inc (GTLB), Medtronic PLC (MDT), MongoDB Inc (MDB), Palo Alto Networks Inc (PANW).