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Investors weigh US fiscal concerns as stocks fall and Treasury yields rise

Investors weigh US fiscal concerns as stocks fall and Treasury yields rise

On Tuesday, major stock indexes declined while yields on longer-dated U.S. Treasury bonds increased. Investors were focused on U.S. financial concerns as Congress discussed a bill to cut taxes.

The S&P 500

Snapped a six-day

Streak of gains

The U.S. president Donald Trump tried to get his fellow Republicans to support the bill. However, he struggled to persuade a few holdouts. This package would, among other things, extend his 2017 tax cuts.

Investors are concerned that the bill could lead to a higher budget deficit in the United States than expected. Moody's Investors Service lowered the U.S. Credit Rating late Friday night, causing investors to worry about the debt burden of the country.

"With the Republican Bill still in the air, it's just enough to make people a bit more cautious, and maybe use this recent rally to trim a bit of their portfolio," said Rick Meckler.

The Dow Jones Industrial Average dropped 114.83 or 0.27% to 42,677.24. The S&P500 fell 23.14 points or 0.39% to 5,940.46 while the Nasdaq Composite dropped 72.75 points or 0.38% to 19,142.71.

Meckler added that investors are also reevaluating the recent rally, and taking into consideration the possible fallout of the changes in U.S. Tariff Policy.

Home Depot shares closed down 0.6% despite the fact that Wall Street expectations for first-quarter revenue were exceeded.

The MSCI index of global stocks fell by 0.77 points or 0.09% to 816.72.

European stocks closed at nine-week highs with telecom and utilities companies leading the gains. The pan-European STOXX 600 rose by 0.73%.

The yields on longer-dated U.S. Treasury bonds have risen amid U.S. financial concerns.

The 10-year benchmark yield in the United States rose by 0.2 basis points, to 4.477%. The 30-year bond rate rose 2.3 basis points to 4.965%. In intraday trading on Monday, it reached 5.037%, its highest level since November 2023.

The yields of Japanese government bonds with a super-long maturity date reached all-time records on Tuesday. This was a result of a disappointing auction of securities with a 20-year maturity.

The Japanese yield on the 20-year bond jumped up to 15 basis points, reaching 2.555%. This is its highest level since 2000. And, for the 30-year bond, it reached a new record of 3.14%.

Dollar fell again due to more cautious comments by Federal Reserve officials about the economy.

Alberto Musalem, President of the St. Louis Federal Reserve Bank, said that despite recent ease in U.S. China trade tensions the labor market is likely to weaken, and prices are expected to rise.

By the end of the year 2025, traders expect the Fed to cut rates by at least 25 basis points.

The dollar dropped against the yen and reached a two-week low at 144.095 yen. It then traded down 0.2% to 144.495, slipping in five out of the six sessions.

The Aussie Dollar was down last 0.6% to US$0.6416, after the Reserve Bank of Australia lowered benchmark interest rates by a further 25 basis points.

In Canada, inflation eased in April to 1.7%, which was higher than the 1.6% economists expected.

The oil price has remained stable amid the uncertainty surrounding U.S.-Iran talks and Russia-Ukraine negotiations.

Brent futures fell 16 cents or 0.2% to settle at $65 a barrel. Meanwhile, U.S. West Texas Intermediate crude (WTI), which is a blend of U.S. West Texas Intermediate and West Texas Intermediate, dropped 13 cents or 0.2% to settle at $60.56.

The dollar continued to weaken, and gold prices increased by more than 1%. Spot gold increased 1.86%, to $3288.96 per ounce.

(source: Reuters)