Global bond selloff pressures stocks as Treasury yields climb

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Global bond selloff pressures stocks

Highlights

U.S. 30-year Treasury yield rises above 5.33%, a two-decade high, pressuring global equities as German and Japanese yields also hit multi-year peaks.
S&P 500 and Nasdaq futures decline due to higher yields impacting technology names, after S&P 500 fell 0.5% in the previous session and Dow futures stay flat.
Home Depot stock gains over 2% after beating earnings and revenue expectations, delivering 1.7% comparable sales growth, and reaffirming full-year guidance despite a weak housing market.

Bond yields and stock pressure

As reported by CNBC, the global bond market selloff remains the central market theme, with the U.S. 30-year Treasury yield above 5.33%, around a two-decade high. Germany’s benchmark 10-year bund is also near a 15-year high, while Japan’s 10-year bond yield stands at a three-decade high.

Investors are reacting to concerns that inflation could stay elevated for longer, while the U.S.-Iran war shows little sign of easing and traffic through the Strait of Hormuz remains disrupted. Worries about large government deficits in the U.S. and the UK, along with rising corporate debt issuance tied to AI investment, are also competing for capital that traditionally flows into sovereign debt.

Stock futures reflect that pressure, with S&P 500 and Nasdaq futures lower before the open, while Dow futures are roughly flat. Higher yields weigh more heavily on technology shares because they reduce the present value of expected future profits, helping explain why the Nasdaq is under the most pressure after the S&P 500 fell 0.5% in the previous session.

Company calls reshape sector outlook

Home Depot reports a solid quarter despite what Chief Financial Officer Richard McPhail describes as a frozen housing market in a CNBC interview. The retailer posts earnings and revenue above expectations, reaffirms full-year guidance and delivers 1.7% comparable store sales growth, its best result on that measure since the third quarter of 2022, sending the shares up more than 2%.

Analyst actions also drive individual stock moves across software, cybersecurity, retail and healthcare. UBS raises its Snowflake price target to $425 from $370, while Barclays lifts its target on CrowdStrike to $235 from $169 ahead of next week's earnings, citing improving net annual recurring revenue and potential momentum from the company's Fal.Con event from Aug. 31 to Sept. 3.

In retail, Raymond James downgrades Abercrombie & Fitch to hold from buy on valuation after a strong rally, while Needham advises investors to avoid Lululemon ahead of earnings because of demand concerns and uncertainty around incoming Chief Executive Heidi O’Neill. In travel, Mizuho cuts Norwegian Cruise Line to hold from buy despite a constructive view on the broader cruise sector, while Cantor Fitzgerald and Mizuho both raise price targets on Amgen but keep hold ratings as investors wait to see whether its late-stage drug pipeline can sustain momentum.

In our earlier article on the jump in long-dated U.S. Treasury yields, we explained how renewed U.S.-Iran tensions and higher oil prices intensified inflation fears and pushed stock futures lower, with technology shares under particular pressure. We also noted that the selloff was not isolated to the U.S., as long-term yields in Japan and Europe were also climbing toward multi-decade highs while investors reassessed borrowing costs and the policy outlook.

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