Rising government bond yields constrain global stocks; traders weigh tariffs, Fed cuts rate Reuters

By Chibuike Oguh and Alun John

NEW YORK/LONDON (Reuters) – A selloff in global bonds continued on Wednesday, weighing on Wall Street stocks and strengthening the dollar as signs of continued strength in the U.S. economy dampened expectations for aggressive near-term interest rate cuts.

The benchmark rose as much as 4.73%, its highest since April 2024, building on Tuesday’s 7 basis point gain. It was last up by 0.2 basis points to 4.687%.

On Wall Street, the benchmark traded lower for most of the session but ended higher. The Dow also ended higher, while the Nasdaq ended lower. Shares in healthcare, materials, consumer staples, real estate and industrials led the gains. Communication services and energy were the biggest losers.

A sell-off in bonds accelerated on Wednesday after CNN reported that US President-elect Donald Trump was considering declaring a national emergency to provide legal justification for a raft of blanket tariffs on allies and adversaries alike.

“Since Trump was elected president, rates have only been going up,” said Bill Strazzullo, chief market strategist at Bell Curve Trading in Boston. “The problem that got him into the White House is inflation and when you look at all of his policies, whether it’s tariffs, tax cuts or deportations, they’re all inflationary.”

It rose 0.25% to 42,635.20, the S&P 500 rose 0.16% to 5,918.25 and fell 0.06% to 19,478.88.

European shares fell, with pan-European stocks down 0.2%, and most regional stock markets also in the red. MSCI’s measure of shares worldwide fell 0.12% to 845.95.

European government bond yields rose, with those on Germany’s benchmark 10-year bond hitting their highest levels in about six months. Britain’s 10-year gilt yield rose more than 11 basis points to 4.82%, the highest since 2008.

Strong U.S. economic data weighed on U.S. government bonds in recent weeks, with investors reducing expectations for a rate cut by the Federal Reserve.

Markets are fully pricing in just one 25 basis point interest rate cut in 2025 and see about a 60% chance of another.

Investors will watch for more comprehensive non-farm payrolls data on Friday after Wednesday’s data showed a smaller-than-expected increase in private payrolls and jobless claims.

“One thing I’m concerned about is that this bonfire of rising yields tends to reinforce each other, especially at times like this,” said Michael Purves, CEO and founder of Tallbacken Capital Advisors. “I’m concerned about whether you can buy 10-year Treasuries at 5% with zero risk and that’s a higher yield than the S&P 500, which is going to raise a lot of questions about asset allocation.”

which measures the dollar against a basket of currencies including the yen and euro, rose 0.29% to 109.02, with the euro down 0.23% to $1.0315.

Oil prices were under pressure from a stronger dollar and a big rise in US fuel inventories last week. was down 89 cents, or 1.16%, at $76.23 a barrel. US West Texas Intermediate crude fell 93 cents, or 1.25%, to $73.32.

Gold prices advanced. rose 0.51% to $2,662.90 an ounce. The US rose 0.3% to $2,672.40.

“Going into this first quarter where we’re at right now, aside from earnings, I think the big risk for stocks is if bond yields hit 5%,” said Mark Malek, chief investment officer at SiebertNXT in New York. “Buyers will be a little more restrained. So, the people who gave the market more strength, the supply will weaken.”