New York stock market falls as global long-term bond yields surge

Tariff uncertainty adds to worries about fiscal crises in advanced economies

Over the past weekend, uncertainty rose after a U.S. federal appeals court ruled the Trump tariffs unlawful, and with concerns about fiscal crises in advanced economies such as the U.S. and Europe pushing global bond yields sharply higher, U.S. stocks fell sharply on the 2nd (local time).

At 10 a.m. U.S. Eastern time, the S&P500 and the Nasdaq fell 0.9% and 1.1%, respectively. The Dow Jones Industrial Average dropped 0.7%.

The weakness in long-term government bonds that began last week continued.

The 30-year Treasury yield jumped early in the morning by 6 basis points (1bp=0.01%), approaching 5%, but as of this time it stood at 4.96%, up 4bp. The benchmark 10-year Treasury rose 5bp to 4.277%. Bond yields and prices move in opposite directions.

The 2-year Treasury, which had been strong on hopes of rate cuts, also turned weak that day, rising 4bp to 3.662%.

European government bonds also weakened across the board, with Germany's 10-year yield at 2.79% and the UK's 10-year yield at 4.80%.

As government bond yields rose, technology stocks broadly turned lower.

NVIDIA shares fell more than 2%, and Palantir was down about 3%. Tesla, whose sales in Europe remain sluggish and whose sales in China and the newly entered Indian market are still minimal, along with most tech stocks included in the Magnificent 7 — Microsoft, Apple, Alphabet, Amazon, Meta — declined.

The dollar strengthened, with the Bloomberg Dollar Spot Index rising 0.6% that day. The Japanese yen fell 0.9% against the dollar to 148.53 yen, and the British pound dropped sharply, trading at $1.3370, down 1.3% against the dollar.

The short-term possibility of Fed rate cuts, long-term inflation concerns, and global market unrest combined to create a perfect environment for precious metals such as gold and silver.

Gold surged to $3,508.5 per ounce in European trading, reaching an all-time high, and silver hit $40.49 per ounce, its highest level in 14 years.

Bitcoin rose 0.4% to $109,353.33, while Ether rose 0.1% to $4,296.04.

Sam Stovall of CFRA Research predicted, "While the market awaits a new catalyst, it will likely give back some of the recent gains in the short term."

According to CNBC, September has historically been the weakest month for the U.S. stock market. The S&P500 has fallen an average of 4.2% in September over the past five years and by more than 2% on average over the past 10 years.

Kim Jeong-a, guest reporter kja@hankyung.com