U.S. stocks ended Friday in the green but posted a weekly loss as rising bond yields weighed on the markets, with both the 30-year Treasury bond and the 10-year Treasury note trading at multi-year highs.
The Dow Jones Industrial Average closed at 53,277 on Friday, down 0.85 percent for the week. The S&P 500 dipped 1.43 percent to finish the week at 7,674. The Nasdaq fared the worst, falling 2.05 percent, while the small-cap Russell 2000 finished 1.65 percent lower. The CBOE Volatility Index rose 6.18 percent to settle at 15.13—a sign that fear is returning to the market.
Bond yields have been under upward pressure from elevated inflation, rising government deficits, and a flurry of corporate debt issuance by tech companies building out AI infrastructure.
The 30-year U.S. Treasury bond yield topped 5.33 percent on Tuesday, its highest level since 2007. The 10-year Treasury note yield topped 4.74 percent, its highest level so far in August.
The Treasury Department tried to halt the rise and announced on Wednesday that it would expand long-maturity government debt buybacks. This move sparked a brief bond rally, with the 30-year bond yield dipping to 5.18 percent and the 10-year yield falling below 4.63 percent.
However, by Thursday, the 30-year yield had edged back up to 5.26 percent, regaining much of the ground it had lost before the Treasury’s announcement, while the 10-year yield reached 4.71 percent.
Federal Open Market Committee’s July meeting minutes, released Wednesday afternoon, highlighted the central bank’s concerns about elevated inflation and revealed division among its members over the direction of monetary policy. This added to uncertainty over the outlook for interest rates and bond yields.
“Given [Federal Reserve Chair Kevin] Warsh’s desire to say less and [Treasury Secretary Scott] Bessent’s actions [on Wednesday], the center of gravity could be moving from the Fed to the Treasury. We’ll have to see if this continues because it would be a big change for traders,” David Russell, head of Market Strategy at TradeStation, told The Epoch Times.
Melissa Cohn, regional vice president of William Raveis Mortgage, said the Treasury’s intervention did little to change the underlying picture.
“I think the bond market is more concerned with inflation, and more concerned with the burgeoning federal deficit,” she told The Epoch Times. “The whole plan came out of the blue, and if you look at oil prices and everything else, this is not really the time to be doing something like this,” Cohn said.
A sustained rise in oil prices, driven by escalating tensions between the United States and Iran over the Strait of Hormuz, also fueled inflation concerns and pushed yields higher. By midweek, Brent crude had pushed above $93 a barrel, its highest level since July 24, after President Donald Trump announced a sweeping package of economic measures targeting Iran.
Brock Weimer, an analyst on the investment strategy team at Edward Jones, said in an online post that although the Treasury Department’s increased debt buybacks were small compared with the roughly $32 trillion Treasury market, their signaling effect was significant.
“Looking forward, the U.S. administration is expected to unveil a fiscal consolidation initiative to help alleviate rising debt and funding costs, which may address some of the market uncertainty,” he said.
The bond-yield turmoil produced a clear pattern of winners and losers.
Yield-sensitive sectors—tech and small caps—were hit hardest over the week, with the Nasdaq and Russell 2000 among the biggest decliners on days when yields spiked. Semiconductor stocks were a persistent drag: Nvidia, Intel, and Broadcom fell 0.99 percent, 4 percent, and 4.57 percent, respectively, even as broader indexes rebounded midweek.
Homebuilders and consumer loan companies moved in the opposite direction, rallying when the Treasury’s buyback briefly pushed yields lower, since cheaper borrowing costs support home and auto purchases.
Pharmaceutical and biotech stocks were a bright spot for the week.
Moderna and Merck shares jumped on news of a successful trial for their cancer vaccine, and Merck, a Dow Jones and S&P 500 member, went on to hit a new high by Friday—underscoring what strategists described as a broader rotation out of semiconductors and into the pharmaceutical sector.
Individual company news also moved markets.
Boeing fell 1.30 percent following an Army Apache helicopter crash. Meta dropped 3.54 percent ahead of a social media addiction trial. Nike slid 4 percent to a multiyear low amid skepticism over its turnaround plan. Data storage and memory chip stocks came under pressure after their Korean counterparts sold off overnight, with the KOSPI sinking 1.6 percent and the tech-heavy KOSDAQ falling 3.5 percent.
Retail sent mixed signals. Walmart, a barometer of spending among low-income consumers and a member of both the Dow Jones and the S&P 500, posted a weak U.S. sales report, sending its shares down 9.15 percent and weighing on the broader retail sector. By contrast, strong sales from Ross Stores and BJ’s Wholesale Club helped lift retail stocks as the week closed.
Despite the volatility, the week’s final session brought a broad rebound: the Russell 2000 rose 0.85 percent, the Dow Jones gained 0.98 percent, and the S&P 500 and Nasdaq each added 0.43 percent.
Crypto-related stocks lifted the broader market, with Bitcoin rising above $77,000, its highest level since May. Meanwhile, the S&P Global Composite Purchasing Managers’ Index rose to 56 in August from 54.5 in July, marking its strongest expansion since April 2022. Strong sales from some retail and pharmaceutical companies also boosted sentiment.
But those Friday gains weren’t enough to offset the losses driven by the week’s dominant theme—a sustained rise in bond yields.