Nasdaq 100 Index: Stock Market Forecast Sours as Tariff Ruling Fuels Yield Surge

Dow Drops 500+ Points as Tariff Ruling and Surging Yields Rattle Markets

U.S. equities kicked off September on a sour note, with the Dow Jones Industrial Average tumbling 537 points, or 1.18%, as traders digested a court decision challenging Trump-era tariffs and rising bond yields. The S&P 500 fell 1.24%, while the Nasdaq slid 1.35%, reflecting broad-based risk aversion to start what’s historically the weakest month for stocks.

Are Tariffs Back in Focus After Court Ruling Against Trump’s Levies?

Traders were unnerved by a federal appeals court ruling that declared most of former President Trump’s tariffs illegal, asserting only Congress has the authority to impose such duties. While the tariffs remain for now, the risk of retroactive refunds has spooked bond markets, raising questions about future fiscal strain. Trump has vowed to appeal to the Supreme Court, but uncertainty over the outcome has already pressured market sentiment.

How Are Bond Yields Reacting to the Tariff Uncertainty?

Treasury yields surged as refund risk raised concerns about increased government borrowing. The 10-year yield jumped over 7 basis points to 4.296%, while the 30-year touched 4.986%. Traders now face the added prospect of further Treasury issuance to cover a potential $172.1 billion shortfall if refunds materialize. The move in U.S. yields mirrored gains overseas, where sovereign debt markets saw 30-year yields hit multi-year highs in Germany, France, and the U.K.

Which Sectors and Stocks Took the Biggest Hit?

Tech and financials led losses, with sector benchmarks falling 1.57% and 1.49%, respectively. Nvidia dropped over 2%, while Palantir slid 3%, as investors took profits on high-flyers. Industrials and consumer discretionary names were also hit hard, shedding over 1.4% each.

On the upside, PepsiCo gained 4% after reports that Elliott Management took a $4 billion stake. Air Lease surged over 6% on news of a multi-firm merger deal, and Cytokinetics soared 26% on strong clinical trial results.

Will September Live Up to Its Bearish Reputation?

With September historically delivering the weakest performance for the S&P 500—averaging a 4.2% drop over the past five years—traders are bracing for more downside. Despite a strong August, where the S&P 500 notched five record highs and rose nearly 2%, analysts expect a consolidation phase. Sam Stovall of CFRA notes that years with 20+ new highs before September have still ended with average monthly losses.

What’s Next for the Fed and the Market?

The focus now turns to Friday’s August jobs report, a key input for the Federal Reserve’s upcoming interest rate decision. Traders are watching wage growth and unemployment figures for any signs that could alter the Fed’s current pause stance. Until then, tariff-related fiscal concerns and bond market stress will likely keep equities under pressure.

More Information in our Economic Calendar.