New York — U.S. stocks fell sharply on Wednesday as rising bond yields and fears over a ballooning federal deficit rattled investor confidence, sending major indices and the dollar downward.
The yield on the benchmark 10-year U.S. Treasury note climbed to nearly 4.6%, its highest since February, amid a wave of selling triggered by investor anxiety over a proposed tax-cut bill in Congress. The legislation, backed by former President Donald Trump, aims to slash taxes and reduce federal spending, but analysts warn it could significantly increase the national deficit.
All three major U.S. indices closed down by more than 1.4%, with the Dow Jones Industrial Average dropping 1.9% to 41,860.44, the S&P 500 falling 1.6% to 5,844.61, and the Nasdaq Composite shedding 1.4% to 18,872.64.
“Investors are getting worried about the Trump tax bill that is working its way through Congress that is not going to be trimming the debt but actually adding to it,” said Sam Stovall of CFRA Research. “As a result, the bond yields have been moving higher and that is causing investors to be concerned.”
Kathleen Brooks, research director at XTB, warned of broader market repercussions: “A bond market crisis is exactly the sort of event that could send stocks tumbling and volatility surging. It’s also harder to recover from compared to the man-made tariff crisis.”
Meanwhile, Bitcoin surged to a new record high of $109,499.76 as optimism around upcoming U.S. cryptocurrency legislation bolstered investor sentiment.
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In Europe, London’s FTSE 100 managed a modest gain of 0.1% despite higher-than-expected inflation, which may delay anticipated rate cuts by the Bank of England. Germany’s DAX rose 0.4%, while France’s CAC 40 slipped 0.4%.
Oil prices, which briefly spiked after a CNN report claimed Israel was planning to strike Iranian nuclear sites, reversed course following a surprise U.S. Energy Information Administration report showing an increase in U.S. crude stockpiles. Brent crude fell 0.7% to $64.91 per barrel, while WTI also dropped 0.7% to $61.57.
Among individual stocks, Alphabet gained 2.9% after unveiling plans to integrate ads into its new AI-powered search mode. Target, however, slumped 5.2% following a disappointing earnings report and continued fallout from consumer backlash over corporate policy reversals.
The day’s market turmoil coincides with G7 finance leaders gathering in Canada, where global economic uncertainty, the Ukraine war, and trade tensions remain key topics.
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