U.S. equities retreated on Tuesday as the benchmark 10-year Treasury yield climbed to its highest level since January 2025, intensifying headwinds for growth-oriented stocks. The S&P 500 and Nasdaq each recorded their third consecutive session of losses, as market participants awaited the release of Federal Reserve minutes and Nvidia's highly anticipated earnings report later this week.
Rising bond yields have historically weighed on growth stocks by reducing the present value of future earnings. The 10-year yield's breach of the 4.5% threshold, a level that ClearBridge Investments' Jeff Schulze described as a key psychological trigger, has sparked renewed caution across Wall Street. Schulze identified rising rates as the primary catalyst behind the current selloff.
Nvidia remained the center of attention. Options markets priced in a potential swing of approximately 6.5% in either direction following the company's earnings release, which could translate into a $355 billion change in market capitalization, according to Reuters. Matt Amberson, founder of ORATS, noted that investors may have grown complacent regarding AI-related capital expenditures, particularly in data centers and semiconductor infrastructure. Chris Murphy, co-head of derivatives strategy at Susquehanna, observed that options buyers are increasingly paying for upside participation while some investors hedge gains in the most popular chip stocks.
Dell Technologies seized the spotlight at its Dell Technologies World conference, unveiling its AI Factory program in partnership with Nvidia. The initiative encompasses workstations, servers, storage, and full rack-scale systems. CEO Michael Dell declared that "abundant intelligence is here," while Nvidia CEO Jensen Huang described demand as "going parabolic," emphasizing growing enterprise adoption of AI agents. Evercore raised its Dell price target to $270 from $240, maintaining an outperform rating, and Bank of America set a $280 target while reiterating its buy recommendation.
ServiceNow received a fresh vote of confidence from Bank of America analyst Tal Liani, who initiated coverage with a Buy rating and a $130 price target. Liani expressed optimism that ServiceNow would benefit from, rather than be disrupted by, new AI solutions. He also set an Underperform rating on Salesforce, highlighting the competitive dynamics in the enterprise software space. Software shares have faced pressure this year amid concerns that AI could undermine subscription models, but investors are beginning to differentiate potential winners from laggards.
Home Depot provided a non-AI bright spot after reporting first-quarter results that exceeded expectations on both sales and profit. The retailer reaffirmed its full-year outlook, noting that customers are delaying larger home improvement projects due to economic uncertainty. Comparable sales remained weak, but strong performance in the professional contractor segment helped offset sluggish do-it-yourself spending. CEO Ted Decker said the customer base is "in reasonably good shape," though uncertainty continues to delay major projects. Telsey Advisory Group's Joseph Feldman noted that Home Depot is gaining market share and executing well, but a full housing recovery remains distant.
While these four names have attracted selective buying interest, the broader market remains vulnerable. Rising yields, elevated oil prices, or disappointing Nvidia results could quickly reverse gains even in fundamentally strong companies. Schulze emphasized that the 10-year yield's trajectory is the key variable to watch, with 4.5% serving as a critical inflection point. For now, the investment landscape favors those who can tolerate volatility in Nvidia, seek AI infrastructure exposure through Dell, capitalize on software upside with ServiceNow, or adopt a defensive posture with Home Depot. Each pick requires a clear catalyst and a disciplined risk management strategy.
