Stock market today: Warnings for a stock drop rise as bond yields spike

High bond yields are battering stocks this week, calling into question the durability of this year’s record-setting streak of gains.

US stocks fell on Tuesday as Treasury yields continued to inch higher, with the 10-year Treasury yield touching its highest level since 2007. It ignited another round of selling on Wall Street and coincided with a handful of fresh warnings from analysts about a coming pullback in the market.

The 10-year Treasury yield, which influences borrowing costs for US consumers and businesses, rose as high as 5.04% before pulling back to around 4.99% mid-day Tuesday.

The 5% mark for the 10-year is a key psychological threshold that has represented a “danger zone” for stocks, and the latest surge shows just how sharply expectations for a Fed rate hike have risen as markets grow anxious about the state of the economy.

A renewed rise in oil prices in the last week is fueling fears about inflation. Brent has spiked to nearly $110 a barrel this week, while US crude was trading above $106 Tuesday afternoon.

Demand for government bonds has also been weak amid concerns about the US’s fiscal health, another factor pushing yields higher.

US stocks tumbled with the latest yield spike, with the Dow shedding more than 500 points by around midday.

Here’s where US indexes stood around 1:45 p.m. ET:

• S&P 500: 7,582.40, down 0.5%
• Dow Jones Industrial Average: 51,986.98, down 0.83% (-434.22 points)
• Nasdaq 100: 28,943.30, down 0.63%

On Wall Street, warnings among market strategists about further weakness in stocks are also starting to build.

Wells Fargo flagged the risk of a 5% to 10% drawdown in stocks this year before markets resume their rally. The bank trimmed its year-end price target for the S&P 500 to 7,700 from 7,950, implying 1% upside from current levels.

“We’re entering late innings of the cycle, arguing for multiple compression,” the bank wrote, adding that investors currently looked too exposed to stocks. Strategists also pointed to the recent spike in bond yields as one headwind.

Morgan Stanley flagged the risks of a near-term stock correction due to an “unexpected inflation shock,” such as if bond yields were to rise if oil prices continued to surge.

“While such an adjustment could lead to a correction in equities in the near-term, we would view that as the finishing move to the corretion and mid cycle / quality transition that began several months ago,” a team led by the bank’s Mike Wilson wrote of the outlook going forward.

In a note to clients on Monday, Bank of America revised its year-end target for the S&P 500 to 7,400, up from the previous target 7,100. The updated price target still implies 2% downside from the index’s current levels.

“Cautious on inflation, the Fed, EPS quality, credit risks. We are overdue for a pullback & entering a seasonally weak period,” strategists wrote on Monday, referring to how stocks tend to see their worst performance of the year in the late summer to early fall period.

The S&P 500 typically sees three pullbacks of around 5% in a calendar year, though the index has only seen one such dip so far in 2026, the bank said. Around half of Bank of America’s “bear market signposts” have also been triggered, strategists added.