Equities fall on rising Treasury yields

General market commentary

US equity markets declined sharply on Wednesday, with all three major indices posting their steepest daily losses in over a month. The Dow Jones Industrial Average shed nearly 817 points, or 1.91%, while the S&P 500 and Nasdaq Composite fell 1.61% and 1.41%, respectively. Sentiment was dented by a spike in Treasury yields, particularly after a weak 20-year bond auction heightened concerns around the growing US fiscal deficit. The benchmark 10-year yield climbed to 4.589%, its highest since mid-February, while the 30-year yield pushed past 5%. The rise in yields weighed heavily on rate-sensitive sectors such as real estate, healthcare, and utilities. Small-cap shares also struggled, with the Russell 2000 posting its largest one-day decline since April. Meanwhile, communication services was the only S&P 500 sector to finish in positive territory, bolstered by a 2.7% gain in Alphabet shares. Conversely, UnitedHealth tumbled nearly 6% amid negative headlines and a downgrade, while Target fell over 5% after lowering its full-year outlook.

On the earnings front, the first-quarter season is drawing to a close, with roughly 94% of S&P 500 companies having reported. Retailers dominated Wednesday’s updates, with mixed results across the board. Target cited economic uncertainty as it delivered weaker-than-expected results and cut guidance, while Lowe’s and TJX marginally exceeded expectations and maintained their forecasts. These reports followed Home Depot’s update on Tuesday, which showed stronger sales but slightly soft earnings. Despite some cautious corporate commentary, earnings overall have outperformed expectations, with the S&P 500 on track for 13% growth—well above the 7% forecast at the end of March. Looking ahead, investor attention will soon turn to the tech sector, with Nvidia scheduled to report next week. Although estimates for upcoming quarters have been revised lower, expectations for 2025 remain robust, with consensus pointing to 9% earnings growth. In the fixed income space, the recent surge in longer-term yields reflects a mix of resilient economic data, reduced trade tensions, and renewed scrutiny of US fiscal sustainability.

Latest market and economic update

Asian equities broadly declined on Thursday, led by losses in technology shares as rising U.S. Treasury yields, weak Wall Street cues, and renewed tensions over U.S.-China chip policy dampened sentiment. Japan’s markets fell after underwhelming PMI data signalled ongoing economic strain, while China’s indices bucked the trend with modest gains on expectations of further stimulus.

US futures held steady overnight as investors weighed ongoing fiscal uncertainty and looked ahead to key labour market data, including weekly jobless claims. In corporate news, Lumen Technologies surged in after-hours trading following AT&T’s acquisition announcement, while strong earnings from Snowflake and Urban Outfitters provided a modest boost to sentiment.

European equities ended Wednesday broadly flat, with the STOXX 50 closing at 5,455 and the STOXX 600 holding steady at 554, as investors awaited fresh catalysts amid optimism around increased government spending. Tech shares outperformed, led by a 2.5% rise in Infineon following a partnership with Nvidia, while luxury names such as Hermes, LVMH, and Kering declined over 2% on concerns about weakening discretionary demand in Asia.

The US dollar extended its decline on Thursday, with the dollar index slipping to around 99.5, its fourth consecutive daily loss, as mounting fiscal concerns and weak demand at a 20-year Treasury auction dampened investor appetite for US assets. The euro benefited from the dollar’s weakness, with EUR/USD currently trading at 1.1337.

Oil prices extended losses in Asian trading this morning following a surprise build in U.S. crude inventories and ongoing concerns over a potential supply glut. Uncertainty ahead of renewed U.S.-Iran nuclear talks added to the pressure, as a possible easing of sanctions could pave the way for increased Iranian oil exports amid already rising OPEC+ output.

President Donald Trump reportedly told European leaders in a private call that Vladimir Putin does not want the war in Ukraine to end, believing he is winning, a shift from Trump’s earlier public stance suggesting openness to peace. While Trump announced ceasefire talks, he declined to support new sanctions on Russia, instead proposing lower level negotiations at the Vatican, with discussions expected to begin in mid June.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Lowe’s reported a smaller-than-expected 1.7% drop in first-quarter same-store sales, helped by steady demand from construction professionals, and plans to keep pricing competitive despite possible tariff-related hikes. The company expects flat to modest sales growth in 2025, with earnings per share forecast between $12.15 and $12.40, while shares fell less than 2% following the results.

Snowflake raised its fiscal 2026 product revenue forecast, driven by robust demand for its data analytics services as enterprises increasingly prioritise AI. The company surpassed Q1 estimates with 26% revenue growth, helped by AI partnerships with OpenAI and Anthropic, which enable customers to develop advanced AI models. This boosted its shares by over 7% in after-hours.

Target lowered its annual sales forecast following a sharper-than-expected decline in first-quarter same-store sales, driven by inflation worries and negative reactions to its rollback of diversity policies. The company is also grappling with challenges including tariffs on Chinese imports, inventory mismanagement, and increased competition.

UnitedHealth shares fell almost 6% after reports of secret payments to nursing homes to reduce hospital transfers added to existing challenges including a cyberattack and investigations. Despite denying wrongdoing and the Department of Justice declining to pursue the matter, investor confidence remains low as returning CEO Stephen Hemsley aims to restore stability.

Sanofi agreed to acquire US-listed biotech firm Vigil Neuroscience for $8/share, a 246% premium, valuing the deal at $470 million, to gain rights to Vigil’s early-stage Alzheimer’s drug VG-3927. The drug, aimed at enhancing neuroprotective microglia function, is set for a phase 2 trial, with Sanofi also promising an additional $2 per share to Vigil shareholders upon its first commercial sale.

Super Micro Computer plans to expand its US production capacity to meet growing global demand for AI, considering new manufacturing sites in Mississippi and Texas due to rising costs in Silicon Valley. The company aims to capitalise on the AI boom by increasing localisation efforts and building a third campus in San Jose.

MercadoLibre founder Marcos Galperin will step down as CEO at the end of the year, with current commerce head Ariel Szarfsztejn set to take over from January 1, while Galperin will become executive chairman. The transition, viewed as a natural progression, was well received by investors, with the company’s shares closing at a record high following the announcement.

Amazon will resume selling Nike products directly, ending the period when only independent sellers offered them on the platform, as confirmed by an Amazon spokesperson. Nike had previously stopped selling on Amazon in 2019 over concerns about counterfeit goods and unauthorised sellers, but the two companies are now working together to manage these issues more effectively.

Loop Capital raised its price target for Uber to $105, citing stronger earnings estimates and growing investor confidence in Uber’s role in the autonomous vehicle market. The firm praised Uber’s trip volume growth, asset-light model, and delivery segment, highlighting its position as a key partner for AV innovators and a driver of future profit and cash flow growth.

Stifel upgraded Home Depot to Buy and raised its price target to $425, citing accelerating sales momentum and confidence in the retailer’s long-term growth outlook. The firm highlighted strong first-quarter comparable sales and believes Home Depot is well-positioned to benefit from a rebound in home improvement demand, with upside potential to its full-year guidance.

HSBC downgraded UnitedHealth Group to "reduce" and cut its price target by 45%, citing rising medical costs and the company’s suspension of its 2025 financial forecast amid leadership changes. The insurer faces increased downside risks as CEO Andrew Witty steps down and successor Stephen Hemsley takes over during a challenging period of higher healthcare expenses and operational pressures.

Citi upgraded BYD to Buy and raised its price target to HK$727 from HK$688, highlighting the company’s rapid export market share growth to 38% in early 2025. The brokerage noted BYD is better positioned than peers to benefit from stronger exports, particularly in plug-in hybrid EVs, which remains underappreciated by the market.

Bank of America upgraded AutoZone to Buy and raised its price target to $4,800, citing strong consumer demand and momentum in both DIY and professional segments. The bank highlighted AutoZone’s resilient performance, ongoing commercial programme growth, and supportive macro trends, expecting solid results and continued market share gains.

Upcoming data and events

Today, key economic data including U.S. flash PMIs, jobless claims, and home sales will be released. Major companies like Intuit, Autodesk, Workday, Ross Stores, and Williams-Sonoma are also set to report earnings.

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