Nasdaq and S&P500: US Stocks Rebound Today Despite Treasury Yield Concerns

Stocks Rebound as Treasury Yields Ease, But Deficit Worries Linger

Stocks closed higher Thursday as falling Treasury yields offered relief from recent pressure, even as traders assessed the implications of a new tax and spending bill seen as inflationary and deficit-expanding. The Dow gained 169 points, or 0.4%, while the S&P 500 rose 0.4%. The Nasdaq led with a 0.8% gain.

The session followed Wednesday’s bond market selloff, sparked by a weak 20-year Treasury auction and fears surrounding a nearly $4 trillion tax bill passed by the House. Although the 30-year Treasury yield briefly touched 5.14%—its highest since October—it later pulled back, easing pressure on equities. Investors remain concerned that the bill, which includes tax cuts and increased defense spending, will swell the deficit and push yields higher long term.

Are Bond Markets Signaling More Pain for Equities?

Yields remain the primary focus for traders, especially on the long end of the curve. The 10-year Treasury yield, after spiking earlier, also moderated into the close. Wolfe Research warned that the fiscal outlook remains “unsustainable,” and predicts bond vigilantes may drive long-term rates even higher as they push back on excessive government spending.

Higher long-term yields could weigh further on equity valuations and consumer borrowing costs. The inflation risk from Trump’s universal tariffs adds another layer of uncertainty, making Treasurys less attractive at a time when the U.S. faces a large volume of maturing debt.

Investor Sentiment Turns Bullish—For Now

In sentiment news, the latest AAII survey showed bulls outnumbering bears for the first time since January. Bullish sentiment climbed to 37.7%, just above the historical average, while bearish sentiment dropped to 36.7%. While optimism is building, traders remain split with a high proportion of neutral responses and persistent concerns about fiscal sustainability and Fed rate path.

Which Stocks Made Big Moves?

Retailers and tech names stood out. Advance Auto Parts soared 55% after posting a narrower-than-expected loss and beating revenue forecasts. Urban Outfitters jumped 22% on strong earnings, while Snowflake gained 11.4% after topping revenue and earnings estimates.

Health insurers tumbled following Medicare Advantage audit announcements. Humana fell nearly 5%, and CVS dropped over 1%. Solar stocks were hammered as the House bill appeared unfriendly to green energy incentives. Sunrun cratered 40%, with SolarEdge and Enphase each down over 18%.

What’s the Market Outlook?

Long-term yields will likely remain the key force guiding equity markets. Traders are closely watching Senate deliberations on the tax bill, as well as upcoming Treasury auctions and inflation data. Any signs that fiscal risks are being ignored by policymakers could drive another round of yield-driven equity selling. Until then, sentiment may improve, but the bond market remains the critical pressure point for stocks.

More Information in our Economic Calendar.