The Day Ahead: Markets Under Pressure Today as Yields Climb and Fiscal Fears Intensify

Market Overview

U.S. equity futures edged lower Friday morning as elevated Treasury yields continued to dampen risk appetite. Dow futures slipped 0.04%, Nasdaq 100 futures dipped 0.09%, and S&P 500 futures traded flat. This follows a mixed session Thursday where the S&P 500 and Dow posted a third straight decline, while the Nasdaq Composite gained 0.3%.

Yields on long-dated Treasurys, notably the 30-year, surged as high as 5.161%—a level last seen in October 2023—before easing slightly. The 10-year yield briefly breached 4.6%, amplifying fears over the impact of growing fiscal deficits tied to President Trump’s newly passed tax bill, which the House approved and now moves to the Senate. The bill could add nearly $4 trillion to the national deficit, spurring bond market jitters.

Market sentiment remains cautious amid concerns about U.S. debt sustainability, exacerbated by Moody’s recent downgrade of the U.S. credit rating to Aa1. Major indexes are tracking weekly losses, with the S&P 500 down nearly 2%, the Dow off 1.9%, and the Nasdaq lower by 1.5% week-to-date.

Investors are also preparing for an extended holiday weekend with U.S. markets closed Monday for Memorial Day.

Key Economic Releases

One key data point is on deck for Friday:

• New Home Sales (April) at 14:00 GMT — This release will be closely watched to gauge housing market resilience amid rising borrowing costs.

Notable Earnings

Before the bell, a few notable earnings releases may impact sector sentiment:

• Booz Allen Hamilton (BAH) is expected to report EPS of $1.60.
• Buckle (BKE) is forecast to earn $0.69 per share.

These reports could provide insight into consumer and government contract spending trends.

Commodities, Crypto, and Bonds

Yields eased early Friday but remain elevated. The 30-year Treasury is down 3 bps to 5.025%, 10-year at 4.518%, and 2-year at 3.986%. Markets remain sensitive to the implications of fiscal policy, with concerns about increased bond supply and long-term inflation risks dampening demand for U.S. debt.

Technical Outlook

S&P 500 E-mini futures are holding above the 50-day moving average (5,616.4) but have slipped back below the 200-day (5,887.85), suggesting weakening momentum after the recent high at 5,993.50. The way of least resistance appears to be down with a support cluster at 5,616.50 to 5,596.00 the next major target. On the upside, bulls need to reclaim the 200-day to retest 5,993.50 and target 6,236.50.

Outlook

The primary driver today is the market’s reaction to elevated Treasury yields and debt sustainability fears stemming from Trump’s tax bill. Focus will also be on new home sales data and potential shifts in rate expectations. With bond yields elevated and credit quality concerns rising, risk sentiment is fragile heading into the holiday weekend.

More Information in our Economic Calendar.