Stocks Hit by Dizzying Swings as Bond Yields Surge: The OFC Market Wrap

Stocks Hit by Dizzying Swings as Bond Yields Surge: The OFC Market Wrap

April 8, 2025

By Steven Orlowski, CFP, CNPR

U.S. equity markets endured a turbulent session Tuesday, with stocks careening between gains and losses as a sharp climb in Treasury yields stoked renewed volatility across Wall Street. The bond market’s rapid repricing of interest rate expectations continues to challenge risk assets, leading to another day of whiplash-inducing moves in major indexes.

The S&P 500 ended the day down 0.9% at 5,027.33 after gaining as much as 0.4% earlier in the session. The Dow Jones Industrial Average slipped 332 points, or 0.8%, to close at 38,054.29. The Nasdaq Composite, more sensitive to rising yields due to its tech-heavy composition, fell 1.3% to 15,468.09.

Behind the volatility was the relentless rise in bond yields. The benchmark 10-year U.S. Treasury yield climbed to 4.62%, its highest level since late 2023. The move came amid continued strong economic data, including an upside surprise in March’s ISM Services Index and hawkish comments from several Federal Reserve officials, which together dampened hopes for imminent interest rate cuts.

“This is a classic case of good news being bad news for markets,” said Laura Chen, Chief Market Strategist at OFC Capital Advisors. “The economy’s resilience is pushing rate cut expectations further out, and the bond market is adjusting accordingly — but that adjustment is proving painful for equities.”

Fed Funds futures now price in just one rate cut in 2025, down from three expected at the start of the year. Markets are increasingly aligning with the Fed’s own messaging: that inflation remains sticky and that monetary easing will be gradual, if it comes at all.

Sector Breakdown: Defensive Plays Hold Ground

Defensive sectors offered rare pockets of green, with utilities and consumer staples eking out modest gains. In contrast, technology, real estate, and consumer discretionary shares — all sensitive to interest rate dynamics — bore the brunt of selling pressure.

Mega-cap tech names were notably weak: Apple (AAPL) fell 2.1%, Nvidia (NVDA) dropped 3.6%, and Tesla (TSLA) slid 4.2% following weak delivery numbers in China. The Philadelphia Semiconductor Index shed 2.9% as the AI-fueled chip rally continued to unwind under the weight of higher discount rates.

Financials, meanwhile, were mixed. Rising yields typically benefit banks by boosting net interest margins, but the market’s broader risk-off tone and regulatory uncertainty kept gains in check. JPMorgan Chase (JPM) rose 0.5%, while Goldman Sachs (GS) fell 0.7%.

Commodities & Currency Check

Oil prices surged, with WTI crude gaining 2.4% to $89.17 a barrel, as geopolitical tensions in the Middle East and tighter inventories supported prices. Gold held steady near $2,310 per ounce, maintaining recent gains as investors sought refuge from market turbulence.

In currency markets, the U.S. dollar index (DXY) advanced 0.4%, driven by the yield differential between U.S. and global bonds. The euro and yen both weakened, while emerging market currencies saw broad declines.

Outlook: Earnings on Deck, Rates in Focus

With the first-quarter earnings season set to kick off later this week, traders are bracing for more volatility. Big banks like JPMorgan, Citigroup, and Wells Fargo report Friday, offering early glimpses into corporate America’s health.

But for now, all eyes remain on the bond market.

“Equities are trying to digest a world where 4.5%+ on the 10-year is the new normal,” said Brian Metzger, fixed income portfolio manager at OFC Asset Management. “Until yields stabilize, we’ll likely see more chop and churn across all asset classes.”