Wall Street retreated for a third straight session Tuesday as rising Treasury yields, stubborn inflation concerns, and uncertainty surrounding U.S.-Iran negotiations weighed on investor sentiment.
By yourNEWS Media Newsroom
U.S. stocks closed lower Tuesday after bond yields climbed to their highest levels in more than a year, as investors reacted to persistent inflation pressures tied to elevated oil prices and mounting uncertainty surrounding stalled negotiations between the United States and Iran.
The S&P 500 and Nasdaq both recorded their third consecutive day of losses as traders pulled back following a powerful rally that began in late March. Concerns over renewed inflation and the possibility of additional Federal Reserve rate hikes contributed to the market’s decline.
The benchmark 10-year Treasury yield surged to 4.687 percent during trading, reaching its highest level since January 2025 before easing slightly later in the session. The yield remained near 4.65 percent by the close.
Investors increasingly focused on the possibility that the Federal Reserve could reverse expectations for future easing and instead resume tightening monetary policy if inflation remains elevated.
Oil prices continued amplifying those concerns as Brent crude remained above $110 per barrel despite settling modestly lower on the day. Energy markets remained under pressure as traders monitored developments surrounding the Middle East conflict and ongoing disruptions affecting the Strait of Hormuz, a critical global oil shipping corridor.
President Donald Trump added to market uncertainty after confirming Tuesday that the United States remained prepared to resume military strikes against Iran if negotiations fail.
Trump said Monday he halted a planned military operation against Iran that had been scheduled for Tuesday after Tehran submitted a new peace proposal aimed at ending the conflict.
On Tuesday, Trump indicated Iran was seeking a deal while warning that military action could still resume if negotiations collapse.
Vice President JD Vance offered a somewhat more optimistic assessment, telling reporters that both Washington and Tehran had made substantial progress during recent discussions and neither side wanted to see hostilities escalate again.
Still, traders appeared unconvinced that a durable agreement was imminent.
“There’s nothing constructive that’s leading us to believe there’s going to be a ceasefire with any sort of substance,” Michael James, managing director and equity sales trader at Rosenblatt Securities, said during the session.
“As long as there is nothing happening along those fronts, oil is remaining high, bond yields are remaining high, and the market’s anxiety levels are getting increasingly elevated,” James said. “As each day goes by and nothing substantive is happening, that becomes more problematic.”
Markets also increasingly priced in the possibility of additional interest rate hikes from the Federal Reserve later this year.
According to CME Group’s FedWatch tool, traders now assign a 41.7 percent probability to a 25-basis-point rate increase in December. Expectations for a larger 50-basis-point hike climbed sharply to 15.7 percent, up significantly from 4.7 percent one week earlier.
Investors are now awaiting the release of minutes from the Federal Reserve’s latest policy meeting for further insight into whether policymakers are shifting away from prior easing expectations toward a more neutral or restrictive stance.
“Rates are obviously front-and-center,” Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions, said Tuesday.
“It’s really not about the level of rates. It’s about the rate of change,” Melson explained. “Markets can handle a slow, steady grind higher, but when you have these step functions higher, that’s where it tends to translate to some indigestion in the market.”
According to preliminary closing data, the S&P 500 declined 48.74 points, or 0.66 percent, finishing at 7,354.31. The Nasdaq Composite dropped 216.56 points, or 0.83 percent, ending at 25,874.18. The Dow Jones Industrial Average fell 312.77 points, or 0.65 percent, to close at 49,373.35.
Technology shares remained under pressure throughout the session. The Philadelphia Semiconductor Index swung sharply during trading after falling more than 3 percent earlier in the day before recovering some losses.
Investors also positioned cautiously ahead of quarterly earnings from AI chipmaker Nvidia, which is scheduled to report results after Wednesday’s closing bell.
Market participants are expected to closely scrutinize Nvidia’s report for signs that artificial intelligence-related spending remains strong enough to support elevated valuations across the broader technology and semiconductor sectors.
James said traders were already adjusting positions ahead of Nvidia’s earnings announcement because of the company’s outsized influence on both the semiconductor industry and the broader market.
Healthcare stocks outperformed during the session as investors rotated toward more defensive sectors.
Among individual companies, shares of cloud computing firm Akamai Technologies declined after the company announced plans for a $2.6 billion convertible bond offering.
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