US Stock Markets Dip as Bond Yields Rise Amid Fed Uncertainty

The S&P 500 Index ($SPX) (SPY) is down -0.40%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.26%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.63%. June E-mini S&P futures (ESM25) are down -0.37%, while June E-mini Nasdaq futures (NQM25) are down -0.57%.

Today’s market downturn is attributed to rising bond yields, spurred by concerns that the Federal Reserve may adopt a wait-and-see stance on interest rate cuts. The yield on the 10-year T-note has increased by +6 basis points to 4.51%. On Monday, Fed Vice Chair Jefferson and New York Fed President Williams expressed a desire to gather more information before making interest rate decisions, noting it “may take months” to fully gauge the impact of recent tariffs and economic policies from the Trump administration. Additionally, a negative sentiment prevails in the market due to Moody’s Ratings stripping the US of its top credit rating last Friday.

This week, traders are closely monitoring tariff developments and potential new trade agreements. Starting today, G-7 finance ministers and central bank governors will convene in Braniff, Canada, and discussions will continue through Thursday. Upcoming economic indicators include an expected increase of +1,000 in weekly initial unemployment claims to 230,000. The May S&P manufacturing PMI is projected to decline by -0.3 to 49.9, while April’s existing home sales are anticipated to rise by +2.0% month-over-month to 4.10 million. However, new home sales for April are expected to drop by -4.7% month-over-month to 690,000.

The market is currently pricing in only a 9% probability for a -25 basis point rate cut at the next FOMC meeting on June 17-18.

The Q1 earnings reporting season is winding down, with over 85% of S&P 500 companies having reported results. Among these, 77% surpassed estimates, marking the best performance since Q2 2024. Earnings growth for Q1 stands at +13.1%, exceeding the pre-season expectation of +6.6%. Expectations for full-year 2025 corporate profits for the S&P 500 have been revised down to a growth rate of +9.4%, down from an initial forecast of +12.5% made in early January.

Internationally, stock markets are experiencing gains today. The Euro Stoxx 50 is up +0.69%, China’s Shanghai Composite closed up +0.38%, and Japan’s Nikkei 225 finished up +0.08%.

Interest Rates

June 10-year T-notes (ZNM25) are down -7 ticks today, with the yield on the 10-year T-note rising by +6.1 basis points to 4.509%. T-notes face pressure from weakness in European government bonds and last Friday’s downgrade of the US government’s credit rating by Moody’s, prompting investors to seek higher yields from Treasuries.

European government bond yields are also on the rise today. The 10-year German bund yield has rebounded from a one-week low of 2.555% and is up +1.7 basis points to 2.606%. Additionally, the 10-year UK gilt yield has climbed by +3.4 basis points to 4.698%. Meanwhile, Germany’s April PPI declined -0.9% year-over-year, falling short of expectations of -0.6% and marking the most significant drop in six months.

ECB Governing Council member Knot indicated that he “can’t rule out” another interest rate cut in June, although he believes it is “too early” to make decisions without fresh quarterly forecasts. Current swaps indicate a 94% chance for a -25 basis point rate cut by the ECB in the policy meeting scheduled for June 5.

US Stock Movers

Cruise line and casino stocks are sliding today, with Norwegian Cruise Line Holdings (NCLH) and Carnival (CCL) down more than -2%. Other companies in the sector, including Royal Caribbean Cruises Ltd (RCL), Las Vegas Sands (LVS), MGM Resorts International (MGM), Wynn Resorts (WYNN), and Caesars Entertainment (CZR), have also dropped more than -1%.

Chip stocks are under pressure, impacting the broader market. Marvell Technology (MRVL) leads Nasdaq 100 losers, down over -3%. Advanced Micro Devices (AMD), GlobalFoundries (GFS), ARM Holdings Plc (ARM), Nvidia (NVDA), Analog Devices (ADI), and Qualcomm (QCOM) have all decreased more than -1%.

AES Corp (AES) is down more than -3% after Jefferies downgraded the stock from hold to underperform with a price target of $9. Viking Holdings Ltd (VIK) has slipped over -7% following the announcement of a Q1 net loss of -$105.5 million, a -79% decline year-over-year. Trip.com (TCOM) is down more than -7% after reporting Q1 gross profit of 11.13 billion yuan, falling short of the consensus estimate of 11.17 billion yuan.

Ryman Hospitality Properties (RHP) has fallen more than -2% after announcing an underwritten registered public offering of 2.3 million shares. Nutanix (NTNX) is down over -1% following a downgrade by Raymond James from outperform to market perform.

On the positive side, Amer Sports (AS) is up more than +15% after reporting Q1 revenue of $1.47 billion, surpassing the consensus estimate of $1.38 billion and raising its full-year revenue forecast to increase by +15% to +17%, up from previous estimates of +13% to +15%. Pegasystems Inc (PEGA) is up more than +5% after being announced as a replacement for Nordstrom in the S&P Midcap 400 Index before trading begins on May 22.

Air Lease (AL) is up over +2% after Citigroup upgraded the stock from neutral to buy with a price target of $68. Deckers Outdoor Corp (DECK) has risen over +2% following TD Cowen’s increase of its price target on the stock to $175 from $150. Pfizer (PFE) is also up more than +2% after entering into a licensing agreement with 3SBio to develop and manufacture a bispecific antibody cancer drug in China. Dollar Tree (DLTR) has climbed more than +1% after BWG Global upgraded the stock from mixed to positive.

Earnings Reports (5/20/2025)

Upcoming earnings reports include Amer Sports Inc (AS), Eagle Materials Inc (EXP), The Home Depot Inc (HD), Keysight Technologies Inc (KEYS), Palo Alto Networks Inc (PANW), Toll Brothers Inc (TOL), and XP Inc (XP).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.