US Stock Market Close: US Bonds Roar with Thunder, All Three Major Indices Post Biggest Decline in a Month

As anticipated by Caixin Global yesterday, with the release of the US Treasury's 20-year bond auction data in the early hours of today, the US stock market collectively plunged against the backdrop of soaring US bond yields.

By the close of trading, the S&P 500 fell 1.61% to 5,844.61 points; the Nasdaq Composite Index dropped 1.41% to 18,872.64 points; and the Dow Jones Industrial Average declined 1.91% to 41,860.44 points.All three major indices recorded their largest daily declines in a month.

(Daily chart of the S&P 500 Index, source: TradingView)

Long-term Treasuries were the hardest hit in the sell-off.The yield on the 20-year US Treasury bond surged 13 basis points to 5.12% during the day, while the 30-year Treasury yield rose to 5.09%; the 10-year Treasury yield also climbed to a nearly three-month high of 4.60%.The US dollar weakened simultaneously against major currencies, a phenomenon colloquially known as the "triple whammy" of stocks, currencies, and bonds.

Market consensus is that the results of this 20-year US Treasury auction were quite poor, though not yet as disastrous as this week's Japanese government bond auction. The highest accepted yield for this issuance reached 5.047%, approximately 1.2 basis points higher than the pre-auction yield of 5.035%, marking the largest tail spread in nearly six months. Meanwhile, the bid-to-cover ratio also declined to 2.46 from the average of 2.57 over the past six months.

George Saravelos, head of foreign exchange research at Deutsche Bank, stated that under such overall conditions, it is difficult for the US stock market to maintain resilience.

Saravelos explained, "From 2023 to 2024, as the market continuously raised its expectations for US economic growth, it was entirely reasonable for US Treasury yields and the stock market to rise in tandem. But the situation is vastly different now. It is hard to argue that negative drivers such as rising capital costs would be beneficial to risky assets."

He also pointed out thatthe most concerning aspect of the market's reaction to the bond auction was the simultaneous weakening of the US dollar.This suggests that "foreign investors are simply unwilling to continue financing the US twin deficits at current price levels."

Performance of Popular Stocks

Apart from Google, which just concluded its developer conference, US tech giants collectively declined on Wednesday. Apple fell 2.31%, Microsoft dropped 1.22%, Amazon declined 1.45%, Nvidia fell 1.92%, Google-A rose 2.79%, Tesla dropped 2.68%, Meta fell 0.25%, and Advanced Micro Devices declined 1.28%.

Chinese ADRs also weakened, dragged down by market sentiment, with the Nasdaq Golden Dragon China Index falling 0.72% on Wednesday.

By the close of trading, Alibaba fell by 1.25%, JD.com by 0.88%, Baidu by 4.32%, Pinduoduo by 1.01%, Bilibili rose by 0.39%, NIO by 0.51%, NetEase by 0.38%, Futu Holdings by 0.76%, Li Auto rose by 3.08%, and EHang Holdings fell by 4.9%. XPeng Motors, which released positive financial results and expects to achieve profitability in Q4, rose by 13%. WeRide, which reported positive progress in its Robotaxi business, rose by 21.42%.

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