Treasury Yields and Nvidia Earnings Put Markets on Edge as 10-Year Rate Holds Near 4.7%

U.S. equity markets retreated Monday as investors pulled back ahead of two high-stakes events: Nvidia's quarterly earnings report and a key inflation reading, both due Wednesday, while long-dated Treasury yields remained stubbornly elevated.

The S&P 500 fell 0.28% in regular trading, and the Nasdaq Composite dropped 0.76%, with declines in chip stocks and other tech names weighing on the broader market. The Dow Jones Industrial Average bucked the trend, gaining 140.15 points, or 0.26%. After the close, futures were little changed, with Dow futures adding 15 points, or 0.03%, and S&P 500 and Nasdaq 100 futures hovering near the flatline.

The 10-year Treasury yield settled at 4.7% on Monday, down more than 3 basis points on the day, after the Treasury Department signaled it could deploy its $1 trillion General Account to fund an expanded government bond buyback program. The 30-year yield has recently topped 5.3%, its highest level in nearly two decades.

The yield surge has been months in the making. The 10-year has climbed from below 4% in February, driven by persistent inflation, heavy government borrowing, and a wave of corporate debt issuance tied to the artificial intelligence infrastructure buildout. Concerns deepened earlier this month when a 30-year Treasury auction drew weaker demand than the prior month despite elevated yields.

The Treasury Department moved last week to announce it would more than double the size of its planned buybacks of longer-dated government debt. Yields initially fell and stocks rallied, but the relief proved short-lived, with rates climbing again by the end of the week.

Jim Cramer, host of CNBC's "Mad Money," said Monday the bond market can no longer be ignored by equity investors. "Unfortunately, it's very important now that long-term interest rates are on the rise," Cramer said.

Cramer pointed to two structural drivers keeping yields high: elevated oil prices tied to the ongoing conflict with Iran, and surging corporate borrowing by technology companies funding data center construction. "As more incremental dollars go to shares or bonds from a hyperscaler, Treasury yields have to creep higher in order to stay competitive," he said.

He also argued the Treasury's tools are limited given the national debt now stands at $40 trillion. "The only real solution to this problem is to either cut spending or raise more revenue and the Treasury can't do either of those things on its own," Cramer said. He added that meaningful relief on long-term rates would ultimately require reopening the Strait of Hormuz to ease oil-driven inflation — "and that's a tall order."

Doug Beath, global equity strategist at Wells Fargo Investment Institute, said the confluence of events this week is likely to amplify market swings. "This week's events combined with overbought conditions, seasonality and midterm elections are likely to accelerate equity market volatility," Beath said. He added that Wells Fargo continues to view pullbacks as buying opportunities, having recently raised earnings targets for all major equity classes except U.S. small-cap.

UBS, in a Monday note, recommended that investors focus on quality bonds with short- to medium-term maturities and maintain equity exposure, arguing that strong corporate earnings should continue to support global stocks. The firm also suggested a "mid-single digit allocation" to gold as a hedge against currency debasement risks tied to financial repression.

Federal Reserve Chairman Kevin Warsh is expected to deliver a speech Friday at the Fed's annual symposium in Jackson Hole, Wyoming — a closely watched event that could shape expectations for the central bank's path on interest rates. The personal consumption expenditure price index reading for July is also due Wednesday, alongside Nvidia's results.

In Asia, South Korea's Kospi dropped 2.37% and the Kosdaq fell 1.23% early Tuesday. Japan's Nikkei 225 slipped 0.55%, while Australia's S&P/ASX 200 edged up 0.29%. Regional sentiment was also pressured by a new round of U.S. sanctions targeting Iran, with Treasury Secretary Scott Bessent saying on X that those who "tether themselves to Tehran should expect to share in the isolation of a withering regime."

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