U.S. stock exchange-traded funds remained under pressure late Tuesday, extending a three-day slide for major indices as a sharp rise in Treasury yields rattled investors and focus tightened on Nvidia's highly anticipated earnings report. The SPDR S&P 500 ETF (SPY) fell 0.7% to $733.73, while the Invesco QQQ Trust (QQQ) dropped 0.6% to $701.53 and the SPDR Dow Jones Industrial Average ETF (DIA) slipped 0.6% to $493.98.
The 10-year Treasury note yield surged to 4.687% during the session, its highest level since January 2025, before easing back to around 4.66%. The move higher in yields, driven by renewed inflation concerns tied to rising oil prices and the lack of a clear U.S.-Iran peace deal, reignited worries about the sustainability of the recent equity rally. Higher yields tend to reduce the present value of future earnings, making growth and technology stocks particularly vulnerable.
Monday's close set a somber tone, with the Dow Jones Industrial Average falling 322.24 points, or 0.65%, to 49,363.88. The S&P 500 shed 49.44 points, or 0.67%, ending at 7,353.61, while the Nasdaq Composite lost 220.02 points, or 0.84%, to close at 25,870.71. Both the S&P 500 and the Nasdaq have now posted three consecutive daily declines.
Technology and communication services shares were the primary drag on the market. According to Reuters, six of the 11 major S&P 500 sectors declined, with materials falling nearly 2.3%. Healthcare was a rare bright spot, gaining 1.1%. The Philadelphia Semiconductor Index, which had been down more than 3% earlier in the day, closed nearly flat as traders refrained from aggressive selling but also paused new buying.
Nvidia (NVDA) shares edged 0.7% lower in after-hours trading to $220.61, with options markets pricing in a potential swing of roughly 6.5%—or about $355 billion in market capitalization—following its earnings report due Wednesday. Matt Amberson of ORATS noted that investors have grown "complacent about AI/capex," while Chris Murphy, co-head of derivatives strategy at Susquehanna, observed a split in options activity: some traders are "willing to chase upside in Nvidia," while others are using options to "hedge or monetize gains" in popular chip stocks like Advanced Micro Devices (AMD) and Broadcom (AVGO), which fell 1.6% and 2.3%, respectively.
Home Depot (HD) provided a lift to the Dow, climbing to $302.44 after reporting first-quarter sales of $41.8 billion, up 4.8% year-over-year, with adjusted earnings of $3.43 per share. CEO Ted Decker said the quarter was "in line with our expectations," but acknowledged "greater consumer uncertainty and housing affordability pressure" tied to elevated interest rates. In contrast, Akamai Technologies (AKAM) was the biggest single-stock decliner on the day, sliding 6.3% to $141.34 after announcing a $2.6 billion offering of zero-coupon convertible senior notes, proceeds from which will be used to expand its Cloud Infrastructure Services unit.
Federal Reserve commentary also weighed on sentiment. Philadelphia Fed President Anna Paulson stated that policy "is in a good place now," but warned that rates may need to stay elevated for longer, or even move higher. Traders responded by increasing bets on a December rate hike, with odds of a quarter-point move rising to 41.7%, according to Reuters. The Fed's minutes from its latest meeting, due Wednesday, could reinforce these concerns.
Market breadth was negative, with declining stocks outnumbering advancing ones by a 2.66-to-1 ratio on the New York Stock Exchange. Volume on U.S. exchanges reached 19.45 billion shares, above the 20-session average. With oil prices remaining elevated and energy costs keeping inflation in the headlines, the path forward for equities hinges on whether Nvidia's earnings can reignite buying interest in megacap tech, or if yields and Fed rhetoric continue to pressure valuations.
