S&P 500: Court Ruling on Tariffs and Rising Yields Shake US Indices Outlook

Wall Street Slips as Court Ruling Sparks Tariff Uncertainty and Bond Yields Climb

U.S. stocks are retreating Tuesday, shortly after the opening, as a federal appeals court ruling challenged the legality of former President Donald Trump’s tariffs, reviving trade uncertainty and pushing Treasury yields sharply higher.

The S&P 500, Dow, and Nasdaq all fell about 1%, dragged lower by tech stocks and rising fiscal concerns. Investors returned from the Labor Day break weighing the court’s decision, which found most of the tariffs illegal but left them in place through October 14 pending a Supreme Court appeal.

Are Trump-Era Tariffs on Thin Ice?

The U.S. Court of Appeals ruled 7-4 that the bulk of Trump’s global tariffs lacked legal grounding, stating that only Congress has the constitutional authority to impose such levies. While the administration plans to appeal, the ruling has introduced new questions about trade policy’s future.

Treasury Secretary Scott Bessent expressed confidence in the Supreme Court, but admitted contingency plans were in place if the ruling stands. RBC strategist Lori Calvasina emphasized that tariffs will likely remain part of the market backdrop regardless of the legal outcome.

Treasury Yields Spike on Fiscal Concerns

Bond markets reacted swiftly, with the 30-year Treasury yield surging to 4.974%—its highest in over a month. The 10-year yield climbed to 4.275%, while the 2-year reached 3.647%.

Analysts flagged the risk that if tariffs are ultimately struck down, the government could be forced to issue refunds, adding pressure to an already stretched fiscal situation.

Overseas bond markets also jumped, with German and French long-term yields hitting decade-plus highs. Rising yields, driven by sovereign risk abroad and domestic uncertainty, weighed on equity sentiment.

Tech Weakness Deepens S&P 500 Losses

Most S&P sectors are in the red, with tech leading the decline. Nvidia dropped 1.5%, Apple lost 0.8%, and Microsoft fell 0.6%.

The CBOE Volatility Index (VIX) spiked to a three-week high, reflecting growing market unease. However, consumer staples found some support from PepsiCo, which rose 3.6% after Elliott Management revealed a $4 billion stake. Gold miners also rallied as bullion prices climbed, with Harmony Gold up 5.6%, and Barrick and Newmont each adding over 1%.

Is the Fed Still on Track for a Rate Cut?

Investors remain focused on economic data that could influence the Federal Reserve’s next move. The ISM manufacturing PMI for August rose to 48.7, slightly better than expected but still signaling contraction. Traders are looking ahead to Friday’s nonfarm payrolls report, a key input for the Fed’s September decision. Fed Funds futures suggest a 92% probability of a 25-basis-point cut, as weak labor data and Powell’s Jackson Hole remarks support a dovish stance.

Market Outlook: September Headwinds with Data in Focus

With legal uncertainty over tariffs, spiking yields, and critical economic data on deck, traders face a challenging start to September—a month historically weak for equities. The pending Supreme Court appeal could add headline volatility, while Friday’s jobs report may tip the scale for the Fed. Equity markets are likely to remain reactive, with bond market stress and fiscal questions taking center stage.

More Information in our Economic Calendar.