Wall Street faces a Bond Reality check 22/05/2025

HOT stories for today

US market wrap:

• In Tuesday’s session, Wall Street saw a broad sell-off as the Dow Jones Industrial Average plunged over 800 points, or 1.91%, marking its worst decline in months. The S&P 500 shed 1.6%, while the Nasdaq Composite fell 1.41%, as surging Treasury yields rattled investor sentiment. 
• Renewed fiscal concerns largely drove the selloff after the U.S. government's latest budget proposal raised fears of further ballooning the national deficit. While corporate earnings and technological innovation remain broadly constructive, Moody’s recent downgrade highlighted a deeper structural risk: America’s growing debt load is beginning to worry creditors. When investor appetite for U.S. debt fades, bond prices fall, yields rise, and Treasuries begin to look more attractive than equities—dragging stocks lower.

Wall Street faces a Bond Reality check

• Long-term U.S. bond yields spiked again Wednesday, with the 30-year hitting 5.09%—a level markets have repeatedly struggled to ignore. Behind the move: a weak 20-year Treasury auction, Moody’s recent U.S. credit downgrade, and growing concern over a proposal to extend Trump-era tax cuts, which would add further strain to America’s already stretched balance sheet.
• Some investors see a troubling pattern. When appetite for U.S. debt wanes, prices fall, yields rise, and equities tend to falter. Wall Street is now watching whether rising rates will trigger more serious dislocations—or political pushback. BMO strategists warn that another spike could rattle foreign buyers and force Washington to respond. With the U.S. needing to finance massive deficits and long-term yields flashing red again—how long can markets keep looking the other way?
   

Stocks on the move:

• Zoom Video Communications (ZM) — Shares of the video conferencing platform rose approximately 1% in after-hours trading after the company released its full-year revenue outlook.
• Snowflake (SNOW) — The cloud data warehousing firm's stock jumped over 6% post-market following a strong first-quarter performance. Adjusted earnings came in at 24 cents per share, beating the LSEG consensus estimate of 21 cents. Its second-quarter product revenue guidance also exceeded analyst expectations.
• Urban Outfitters (URBN) — Shares of the fashion retailer surged more than 9% in extended trading after reporting earnings that topped forecasts. The company posted earnings per share of $1.16 versus the 84-cent estimate, with revenue reaching $1.33 billion, above the projected $1.29 billion.
• Lumen Technologies (LUMN) — The telecom provider’s stock soared 15% after AT&T (T) announced plans to acquire the bulk of Lumen’s Mass Markets fiber internet segment in a $5.75 billion deal, set to close in the first half of 2026. AT&T shares were mostly unchanged.

Today’s action

• Asia-Pacific markets declined Thursday, mirroring Wall Street’s slump amid growing alarm over the potential impact of a massive new U.S. budget bill. Japan’s Nikkei 225 opened 1.06% lower, while Hong Kong’s Hang Seng slipped 0.24%, and China’s CSI 300 edged down 0.14%.
• Investor sentiment remains fragile as deficit fears resurface. A contentious budget bill in the U.S. House has hit a snag, with blue-state Republicans demanding expanded state and local tax (SALT) deductions. The standoff risks derailing key tax legislation that President Trump and House Speaker Mike Johnson aim to pass before Memorial Day. Dow futures dipped 44 points overnight, while S&P 500 and Nasdaq 100 futures hovered flat following Wednesday’s sharp sell-off. Markets will be watching Thursday’s jobless claims for fresh signals on the labor market's health.

Watchlist: NVDA, URBN, LUMN, ZM, SNOW, NFLX, TSLA

Bitcoin

• Bitcoin (BTC) surged to a new all-time high of $109,497 on Wednesday, topping its previous record set on President Trump’s inauguration day in January. Despite the milestone, the rally hasn’t lifted the broader crypto market. Ethereum (ETH), the second-largest cryptocurrency, remains 64% below its November 2021 peak of $4,105—though it has climbed 45% over the past month.
• In a boost for the sector, a stablecoin regulation bill advanced in the Senate this week, setting the stage for a potential floor vote. If passed, it could accelerate the adoption of stablecoins and benefit blockchains like Ethereum, where many are issued.
  Watchlist: Bitcoin: 74,000-109,500, Ethereum: 1500- 2800, Solana: 80-180

Forex

• EUR/USD is trading near 1.1340, approaching a two-week high during Thursday’s Asian session. The euro continues its four-day winning streak as markets await the release of HCOB’s May PMI data, which is expected to show an uptick in Eurozone business activity compared to April. Meanwhile, S&P Global's U.S. PMI is also anticipated to confirm steady economic growth.
• In Washington, the U.S. House Rules Committee approved President Trump’s sweeping tax-cut proposal, advancing the bill toward a floor vote. The Japanese yen advanced following stronger-than-expected Machinery Orders data, reinforcing expectations of a Bank of Japan rate hike in 2025. Renewed safe-haven demand and persistent U.S. dollar weakness are also pressuring USD/JPY, which trades near a two-week low.
  Watchlist: EUR/USD: 1.0700-1.1600, USD/JPY: 140-151

Basic Materials

• WTI crude oil edged down to around $61.10 in Thursday’s Asian session amid reports that the U.S. and Iran will resume nuclear negotiations later this week. The talks raise prospects of increased Iranian supply, pressuring prices. Additionally, EIA data showed U.S. crude inventories rose by 1.328 million barrels for the week ending May 16, adding to the bearish tone.
•  (XAU/USD) climbed for a fourth consecutive session, reaching a near two-week high. The rally is driven by sustained U.S. dollar weakness, fueled by concerns over the U.S. fiscal outlook and growing Federal Reserve rate cuts. Moody’s downgrading the U.S. credit rating and renewed U.S.-China trade tensions have further boosted safe-haven demand.
  Watchlist: GOLD 2600-3500, US Oil: 55.60-70.00
  
   

Key Economic Events Today:

EST time
 08:30 am USD Unemployment Claims
 09:45 am USD Flash Manufacturing PMI
 09:45 am USD Flash Services PMI
 10:00 am USD Existing Home Sales
 10:30 am: USD Natural Gas Storage
 02:00 pm: USD FOMC Member Williams Speaks


Earnings

BMO (Before the US Market opens)
TD               Toronto Dominion Bank
ADI              Analog Devices
WSM           Williams-Sonoma Inc.
AMC (After the US Market closes): INTU, WDAY, ADSK, ROST
 

The TEFS Analyst team wishes you a successful day!