U.S. stocks ended the week lower as long-term bond yields surged to multi-decade highs, erasing a three-week winning streak for major indexes. The S&P 500 fell 1.43%, the Nasdaq Composite dropped 2.05%, and the Dow Jones Industrial Average declined 0.85% for the week ending Friday.
The Treasury Department announced an unusual move on Wednesday, saying it would more than double the size of its buybacks of longer-dated government debt in an effort to stabilize bond markets. The 30-year Treasury yield topped 5.33% on Tuesday, its highest level since 2007, while the 10-year Treasury note reached 4.74%, the highest in August. The Treasury’s buyback expansion briefly pushed yields lower, but they rebounded by Thursday and Friday as rising oil prices and inflation concerns persisted.
Market volatility also intensified, with the CBOE Volatility Index rising 6.18% to 15.13, signaling increased investor caution. The Russell 2000 small-cap index fell 1.65%, reflecting broader market unease.
AI-related stocks faced pressure as political and regulatory scrutiny grew. Pennsylvania Governor Josh Shapiro issued an executive order on Tuesday imposing stricter standards on data center development in the state, citing concerns over energy consumption and infrastructure strain. The move followed broader debates over the environmental impact of AI infrastructure, with some analysts questioning whether the restrictions would meaningfully slow industry growth or serve as election-year rhetoric.
Corporate debt issuance by tech firms building AI infrastructure contributed to rising bond yields, according to market observers. The Federal Open Market Committee’s July meeting minutes, released Wednesday, highlighted concerns about persistent inflation and divisions among policymakers over interest rate direction. Federal Reserve Chair Kevin Warsh’s preference for limited public commentary and Treasury Secretary Scott Bessent’s intervention in bond markets have shifted some attention from the Fed to the Treasury, though the long-term implications remain unclear.
Major market movers included Broadcom, which fell 4% on Wednesday after rival Marvell Technology announced a partnership with Alphabet’s Google to develop custom chips, intensifying competition in the AI semiconductor space. Infrastructure stocks GE Vernova and Eaton dropped 10% and 7.2%, respectively, as investors reassessed growth prospects amid higher borrowing costs.
Analysts noted that while the Treasury’s buyback expansion provided temporary relief, the underlying drivers of yield increases—rising oil prices, inflation concerns, and government deficits—remained unresolved. The week’s volatility underscored the market’s sensitivity to bond market movements, which have increasingly dictated stock performance in recent sessions.