US stocks, the US dollar, and bonds all took a hit during Thursday’s trading session as economic uncertainty grows. The Dow closed lower by 1.91%. The broader S&P 500 slid 1.61% and the tech-heavy Nasdaq Composite fell 1.41%. Each of those performances were the worst for each index in the past month. Most US stocks also dipped on Thursday.
The fall was attributed to weak demand at an auction for 20-year Treasury notes. The Treasury sold $16 billion worth of 20-year bonds, and the auction settled with a 20-year Treasury yield above 5%, signaling investors are demanding higher rates to hold US debt. The weak demand for US Treasuries also comes as Wall Street is already fretting over the potential for President Donald Trump’s “big, beautiful” tax bill.
The bill is expected to do more harm than good: adding to the deficit and put pressure on the federal debt burden at a time when there is heightened uncertainty about the safe-haven status of American assets.
US Stock Pressure Grows
Additionally, the higher bond yields can also entice investors and pull them away from other assets, putting pressure on the stock market. With republicans looking to advance that tax bill, stocks ended Thursday lower. Chip Hughey, managing director for fixed income at Truist Advisory Services, says, “Recent budget deliberations in Washington are not offering global investors much solace that these challenges are being incorporated into the decision-making process.”
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The past week was a good one for the stock market, but that ended on Tuesday after six days in the green. Correspondingly, Wall Street’s fear gauge, the CBOE Volatility Index, has risen more than 15%. The US dollar index, which measures the dollar’s strength against six major foreign currencies, slid 0.5% as well, causing concerns for the future of the USD, which already faces foreign resistance.