MW Stocks tumble as weak bond-market auction has investors wondering how U.S. will manage its debt

By Joseph Adinolfi and Joy Wiltermuth

Worries about rising bond yields are coming home to roost

Investors have been warily eyeing rising Treasury yields since the start of May, with some fretting that the latest jump in borrowing costs could soon start hurting stocks.

Those fears were realized on Wednesday, as a disappointing auction of 20-year Treasury bonds sent yields climbing to fresh highs. Borrowing costs tied to long-dated debt touched levels not seen since late 2023.

"Looks like we are sinking," Peter Cardillo, chief market economist at Spartan Capital Securities, said after the weak 20-year bond auction.

The 10-year Treasury yield BX:TMUBMUSD10Y was knocking on the door of the 4.6% level, and concerns about tariffs and "the battle of the budget" remain, he said.

Republicans are working to pass President Donald Trump's "big, beautiful" budget bill. The latest version of the legislation included tax and spending cuts but would do little to pare the U.S. budget deficit.

"When you have yields jumping up like this, it's a tough crosscurrent for stocks," Cardillo said.

Stocks had shaken off some of their early losses heading into the afternoon, as gains for Big Tech names like Alphabet Inc. $(GOOGL)$ helped push the tech-heavy Nasdaq Composite into the green.

But around 1 p.m., the market suffered a one-two punch. Reports that OpenAI would buy an artificial-intelligence company founded by former Apple Inc. $(AAPL)$ design chief Jony Ive appeared to weigh on shares of Ive's former employer.

Around the same time, the weak 20-year BX:TMUBMUSD20Y auction helped revive concerns about waning foreign demand for U.S. debt. Suddenly, investors were starting to question how the U.S. would manage its debt burden over the long term.

This, combined with the uncertainty surrounding the outlook for the U.S. economy, was enough to weigh on stocks, said Brian Mulberry, client portfolio manager at Chicago-based Zacks Investment Management.

See: Why the next 20-year Treasury auction is 'must-see TV' for investors after the Moody's downgrade

"It's a question of how much growth are we going to get, and what is the revenue stream for the U.S. government looking like to support the debt that they're issuing," he said.

Mulberry also pointed out that pain in debt markets was a global phenomenon on Wednesday, as yields on bonds trading in Japan and Europe also spiked.

Earlier, investors digested weak earnings from Target Corp. (TGT), along with a report from fellow retailer TJX Cos. $(TJX)$, the parent of TJ Maxx, which Mulberry described as not as bad as Target's, but still not great. Shares of both companies were selling off.

The ICE U.S. Dollar Index DXY was also weakening, signaling that the "Sell America" trade might be back on, at least for now. Meanwhile, gold (GC00) and bitcoin (BTCUSD) climbed, with the latter hitting a fresh record high north of $109,000 per coin.

The S&P 500 SPX was off by 85 points, or 1.4%, at 5,856 in recent trading, while the Nasdaq Composite COMP was off by 228 points, or 1.2%, at 18,916. The Dow Jones Industrial Average DJIA was off by 750 points, or 1.8%, at 41,926.

-Joseph Adinolfi -Joy Wiltermuth

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May 21, 2025 14:55 ET (18:55 GMT)

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