Wall Street Suffers Worst Drop in a Month Amid Concerns Over Fiscal Proposal
Treasury yields remained elevated with 30-year bonds touching the 5% mark ahead of a closely watched $16 billion auction of 20-year bonds.
Quick overview
- U.S. stocks fell sharply as concerns over Donald Trump's tax-cut proposal raised fears about increasing national debt.
- The Dow Jones dropped 1.91%, while the S&P 500 and Nasdaq Composite also experienced significant declines.
- Moody's downgraded the U.S. sovereign credit rating, citing rising debt levels, despite the White House's dismissal of these concerns.
- Investors are shifting capital to safer currencies, indicating a cautious outlook on the U.S. economy.
U.S. stocks tumbled and bond yields climbed on Wednesday as fears grew over the potential impact of Donald Trump’s tax-cut proposal on the national debt.
All three major Wall Street indexes closed sharply lower. The Dow Jones Industrial Average, composed of 30 blue-chip companies, dropped 1.91% to 41,860.44 points. The S&P 500, which tracks the largest publicly traded firms, fell 1.61% to 5,844.61, while the tech-heavy Nasdaq Composite declined 1.41% to 18,872.64.
Trump has been pushing a tax cut package in Congress, but analysts in U.S. media have warned that the plan could significantly expand the already massive federal debt—by as much as $3 to $5 trillion.
On Friday, Moody’s became the third major credit agency—after Fitch and S&P Ratings—to downgrade the U.S. sovereign credit rating, citing ballooning debt levels. The White House has dismissed concerns, denying any loss of confidence in the U.S. economy.
Against this backdrop, Wall Street’s top three indexes notched their steepest daily losses in a month. Small-cap stocks also took a hit, with the Russell 2000 marking its worst daily performance since Thursday, April 10.
Within the Dow Jones, Coca-Cola was the only stock to end the session in the green, rising 0.22%. UnitedHealth Group was the biggest loser, plunging 5.78% after The Guardian published a report alleging the company paid nursing homes to reduce hospital transfers.
Bond Market and European Reaction
Treasury yields remained elevated, with 30-year bonds touching the 5% mark ahead of a closely watched $16 billion auction of 20-year bonds. The results are expected to provide a key gauge of long-term demand for U.S. debt.
European markets also pulled back from recent highs. The pan-European STOXX 600 index slipped 0.5%, led by sharp losses in British retailer JD Sports and Swiss bank Julius Baer.
Investors, seeking safety, shifted capital into haven currencies like the Japanese yen and Swiss franc.
“People are beginning to consider moving capital out of the U.S.,” one analyst noted. “It’s not a mass exodus, but investors are clearly eyeing opportunities in other markets.”
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