Sell-off in U.S. Treasury bonds sent stock indices tumbling: S&P 500 and Nasdaq pulled back from their peaks.
Just a few days after updating all-time highs, the U.S. stock market faced a sharp reversal. The pressure is coming not from corporate earnings, but from the debt market: a global sell-off in U.S. government bonds has pushed yields to levels not seen in decades, and this has become the catalyst for a correction in stocks.
Records and Reversal
On August 13, the S&P 500 index closed at a record high of 7,798.99 points, supported by moderate inflation and strong financial results from companies tied to artificial intelligence. Shortly before that, on August 5, the Dow Jones Industrial Average also updated its all-time closing high. However, within just a few days, market sentiment changed dramatically.
As of now, the S&P 500 and the Nasdaq Composite have fallen to two-week lows. The correction has hit the technology sector particularly hard: chipmaker stocks have sharply lost value and halted their growth, which had previously been the main driver of the rally.
Bonds Pressure Stocks
The key trigger is the surge in the yield on 10-year U.S. Treasury bonds to 4.748%, the highest level since January 2025. The yield on 30-year bonds has even updated a 19-year peak, reaching 5.33%. The spread between short-term and long-term rates in the U.S. has widened to its highest level in four years, signaling that investors are demanding an increasingly higher premium for long-term risk.
This wave has not been limited to the States. The yield on 10-year Japanese government bonds jumped to 2.945%, a 30-year high. Against this backdrop, the corporate sector continues to ramp up borrowing: the volume of corporate bond placements since the start of 2026 has nearly reached $1.7 trillion, and at current pace, the annual figure could exceed last year's record of $2.2 trillion. Companies are actively competing with the government for investor capital, intensifying pressure on the market.
A Market in Motion
Asian markets have already reacted with declines: South Korea's KOSPI lost 1.5%, Japan's Nikkei fell 2.5%, and the Philippine chipmaker index dropped 5%. Investors are broadly reassessing valuations of AI-related assets and locking in profits.
Tom Lee of Fundstrat, known for his optimism, now sounds more cautious: he believes that for a sustained move of the S&P 500 above 8,000 points, the market may need a 10% correction. The key event for further dynamics will be the release of the U.S. Federal Reserve meeting minutes—it is this that will determine whether there will be a pause in tightening or whether pressure on markets will continue.
My view: The current correction is not panic, but a natural reassessment of risks after a rapid rally. The bond market is sending a clear signal: inflation expectations and fiscal risks have not gone away. Investors should prepare for heightened volatility in the coming weeks, especially if the Fed minutes do not provide clear hints of policy easing.