U.S. Stocks Tumble as Bond Yields Surge Amid Fed Rate Concerns

U.S. stocks took a sharp downturn on Monday, with the S&P 500 sinking to its lowest level in two months as bond yields soared. The market reaction followed last week’s strong payroll numbers, intensifying fears that the Federal Reserve will maintain its hawkish stance throughout 2025.
By mid-morning, the Dow Jones Industrial Average managed a modest rise of 105.06 points (0.25%) to 42,043.51. However, the S&P 500 fell 40.79 points (0.70%) to 5,786.25, while the Nasdaq Composite plunged 274.13 points (1.43%) to 18,887.50. Wall Street’s fear gauge climbed to its highest level in over three weeks, underscoring growing market anxiety.
The Russell 2000 index, a barometer of smaller domestic companies, dropped 1% to its lowest point since September 2024, deepening Friday’s correction territory slump, having fallen over 10% from its November peak.
Treasury Yields Add Pressure
The surge in longer-term Treasury yields compounded market pressures, with traders scaling back expectations of a Federal Reserve rate cut. Data from LSEG showed bets on a December rate easing dropped to just 27 basis points, compared to 43 basis points before Friday’s jobs report.
“Investors are adopting a cautious approach as monetary policy recalibrates,” said Art Hogan, chief market strategist at B Riley Wealth. “Still, positive economic data ultimately bodes well for corporate earnings and market performance in the long term.”
Tech and Chip Stocks Slide
Technology stocks bore the brunt of Monday’s decline, with the sector down 1.8%. Mega-cap companies struggled: Tesla dropped 2%, Apple slid 2.7%, and Alphabet fell 1.5%. Chipmakers also suffered, with Nvidia tumbling 3.3% and Advanced Micro Devices losing 1% following the U.S. government’s decision to tighten restrictions on AI chip exports.
Mixed Sector Performance
Healthcare stocks bucked the trend, buoyed by a proposed 2.2% increase in 2026 Medicare Advantage reimbursement rates. UnitedHealth Group climbed 3.6%, CVS Health added 4.1%, and Humana surged 5.9%.
Conversely, Moderna plummeted 22% after slashing its 2025 sales forecast by $1 billion, making it the worst performer in the S&P 500.
Inflation Worries Persist
Last week’s robust economic data raised concerns about persistent inflation, clouding the Federal Reserve’s policy outlook. Investors are now eyeing the upcoming Consumer Price Index report and the Fed’s Beige Book, both due Wednesday, for further insights.
As the market adjusts to uncertainties, analysts also noted apprehension about potential trade policies from the incoming Donald Trump administration. Tariff policies and immigration measures are seen as potential inflation drivers.
Market Breadth and Sentiment
Declining stocks outpaced gainers on the NYSE by a 1.96-to-1 ratio and by a 2.57-to-1 ratio on the Nasdaq. The S&P 500 recorded one new 52-week high and 22 new lows, while the Nasdaq Composite reported 11 new highs against 149 new lows.
With major banks like JPMorgan Chase & Co and Wells Fargo set to release earnings midweek, the market remains on edge, bracing for further economic signals.