S&P 500, Nasdaq and Dow End Lower As Soaring Treasury Yields Reflect Inflation Concerns — GOOGL, CSCO, HD, COST, WMT In Focus

• The S&P 500 and the Dow Jones fell 0.7% each, and the Nasdaq fell 0.8%.
• The Federal Reserve will maintain interest rates at the current target range of 3.50% to 3.75% in its June meeting, according to the latest CME FedWatch tool.
• President Donald Trump threatened to resume strikes on Iran in the coming days.

U.S. benchmark stock indices fell on Tuesday as soaring Treasury yields heightened rate-hike concerns, reflecting rising inflationary pressures amid signs of an extended U.S.-Iran war. 

The S&P 500  fell 0.7%, the Nasdaq lost 0.8%, and the Dow Jones dropped 0.7%. The Russell 2000, which tracks stocks with small market capitalizations, fell 1%, the index's third consecutive day in the red. 

Among ETFs tracking benchmark indexes, the SPDR S&P 500 ETF (SPY) fell 0.7%, and Invesco QQQ Trust (QQQ) ended Tuesday around 0.6% lower, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) fell 0.6%. 

The VanEck Semiconductor ETF (SMH) dropped 0.4%. 

Meanwhile, retail sentiment on Stocktwits for SPY, QQQ, and DIA was all in the ‘extremely bullish’ to ‘bullish’ territory. 

US Market Drivers

President Donald Trump said ​on Tuesday that the United States may need to strike Iran again and that he had been an hour away from ordering an attack before postponing it a day earlier.  

Elevated Treasury yields continued to weigh on benchmark U.S. indices. The U.S. 30-year Treasury bond yield hit levels last seen in 2007 on concern that elevated energy costs are increasing the chances that the next Federal Reserve move will be a hike. 

“The bond vigilantes are at play right now,” said Will McGough, Chief Investment Officer at Prime Capital Financial in an interview to CNBC. “Everybody’s on to energy prices staying higher, which could lead into inflation that’s behind the curve a little bit.” 

However, according to the latest CME FedWatch tool, the probability still favors the Federal Reserve holding rates steady at 3.5% to 3.75%. 

Generally, when bond yields spike, investors tend to move away from equities, especially technology shares. A rise in yields raises the cost of borrowing for corporates, diminishing the current value of future earnings in analyst models. 

Industrials, consumer and technology stocks led declines on Tuesday with Nvidia, Microsoft, Alphabet and Amazon contributing the most to S&P 500 losses.

“The issue of rising bond yields is still something which could create problems for today’s expensive stock market,” said Matt Maley at Miller Tabak in an interview to Bloomberg.   

Trending Stocks To Watch 

Alphabet (GOOGL): The company showcased new artificial intelligence coding tools at an event, marking the latest steps to expand its influence in the AI space. 

Cisco (CSCO): Shares dropped 2% on Tuesday after the networking hardware manufacturer’s management raised margin pressure risks going ahead as the company makes its way into AI infrastructure.  

Home Depot (HD): The company reported first-quarter earnings that narrowly beat Wall Street expectations, driven by stable demand. The retailer also reaffirmed its 2026 guidance despite ongoing pressures on housing affordability and consumer uncertainty. 

Costco (COST): Shares hit record highs after an Oppenheimer analyst raised the firm’s price target ahead of its third-quarter earnings, citing the company's defensive business model and superior value proposition. 

Walmart (WMT): Shares hit record highs ahead of its quarterly earnings due later this week, as investors position themselves to judge the retailer’s sales growth amid worsening U.S. consumer sentiment.  

Broader Market Trends 

Oil prices declined slightly on Tuesday as traders focused on President Donald Trump's late Monday announcement that he was canceling a proposed strike on Iran. The decision came after leaders from three major Middle Eastern powers requested that he "hold off".

U.S. West Texas Intermediate futures for June delivery decreased by 0.82%, closing at $107.77 per barrel. Brent crude futures for July delivery dropped 0.73%, finishing the session at $111.28 per barrel, as per data from CNBC. 

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