US equities fell as interest rates swung sharply, with tech stocks coming under pressure. The three structural factors keeping long-term yields elevated and Nvidia's earnings as this week's key focus will be in the spotlight.
Last week, the US stock market was buffeted by sharp swings in interest rates. The S&P500 fell from the previous week, while the information technology sector and the Nasdaq 100 saw particularly steep declines. Meanwhile, crypto assets rose at times in contrast to equities, creating a divergence between the tech-led moves in the stock market and the performance of crypto assets.
The rise in long-term US Treasury yields was one factor behind the weakness in equities from the start of the week. In particular, the 30-year US Treasury yield rose to nearly a 20-year high, prompting the Treasury to expand its long-term Treasury buyback operations and step up its efforts to influence the market.
Three main factors are said to be keeping long-term yields elevated: government debt of more than $40 trillion accompanied by fiscal deficits, tensions in energy markets surrounding uncertainty over oil supplies, and rising demand for funding as AI-related capital investment surges. All are considered difficult to resolve in the short term.
The MOVE Index remains just above 70 at present, leading to the view that instability in the bond market is unlikely to put significant immediate pressure on equities. This week will bring a series of economic data releases, including new home sales, the PCE price index and the revised GDP figure, while Nvidia's earnings will be the market's main focus.