Both the S&P 500 (SPX) and the Nasdaq 100 (NDX) are trading lower on Tuesday, driven by continued weakness in AI stocks, including AMD (AMD), Nvidia (NVDA), Broadcom (AVGO), and Intel (INTC).
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Investor attention has drifted to surging Treasury yields amid higher odds of steady or higher rates. Rising inflation has supported both of these trends, pushing yields higher while keeping expectations for rate cuts off the table. With higher yields, investors are more likely to purchase bonds instead of stocks.
Higher Yields and War Stalemate Pressure Stocks
In addition, higher yields generally reduce the present value of future earnings, lowering valuations in the process. High growth stocks are especially sensitive to rates because a larger share of their value is tied to earnings expected further in the future.
Equities are also facing pressure from a lack of progress in the U.S.-Iran war. Both sides have remained firm with their demands, with the U.S. calling for strict limits on Iran’s nuclear program and Tehran requesting control over the Strait of Hormuz and sanctions relief.