U.S. Markets Retreat: Tech Selloff Sparks Fears of Eroding Investor Confidence

TradingKey - On Wednesday, U.S. financial markets faced a broad downturn, with stocks, bonds, and the dollar all suffering losses. The three major stock indices recorded their largest single-day declines in a month.

Long-term U.S. Treasury bonds were sold off, sending yields surging as concerns grew over a new budget bill potentially worsening the U.S. fiscal deficit. The dollar weakened across the board, with the U.S. Dollar Index, which tracks the greenback against six major currencies, falling 0.42% to 99.60 , breaching the critical 100 threshold.

By market close, the Dow Jones Industrial Average dropped 1.91% to 41,860.44 , the S&P 500 fell 1.61% to 5,844.61 , and the Nasdaq Composite declined 1.41% to 18,872.64.

The technology sector bore the brunt of the selloff, with high-growth tech stocks facing aggressive selling pressure. The "Magnificent Seven" tech giants collectively came under pressure. Tesla shares slid 2.68% , Apple fell 2.31% , and Microsoft, Amazon, and Nvidia each dropped more than 1% .

Alphabet, Google’s parent company, bucked the trend with a 2.8% gain, though its stock initially fell after Tuesday’s AI product launch, as investors weighed potential disruptions to its core advertising business from AI investments.

U.S. Treasury yields spiked sharply, with the 30-year yield surging to 5.09% and the benchmark 10-year yield rising 11.5 basis points to 4.59% . The 2-year yield climbed to 4.01% , deepening the inversion of the yield curve—a signal of market anxiety over the Federal Reserve’s policy trajectory.

The U.S. Dollar Index fell 0.56% during the session and closed at 99.555 in New York trading. Non-U.S. currencies rallied broadly: the euro rose 0.39% to $1.1330 , the British pound gained 0.19% to $1.3419 , and the Australian dollar climbed 0.20% to $0.6437 . The yen strengthened against the dollar, with USD/JPY falling 0.57% to 143.68 . The dollar also weakened against the Canadian dollar (-0.40% to 1.3860 ) and the Swiss franc (-0.38% to 0.8253 ).

Amid the turmoil, gold and healthcare stocks showed relative resilience. Analysts noted increased investor demand for low-volatility assets amid economic uncertainty, partially offsetting broader market losses.

Key Events to Watch Ahead:

May 22 : Preliminary May S&P Global Manufacturing PMI data and April existing home sales figures (annualized).

May 23 : New York Fed President John Williams, a permanent FOMC voter, will speak on monetary policy implementation—investors will closely monitor his comments for hints about future rate cuts.