Wall Street falls for 3rd straight session as Treasury yields surge

All three major US stock indexes closed lower Tuesday (local time), with the NASDAQ leading declines at 1.33 percent.

The indexes, which had been setting all-time highs last week, extended their losing streak to three consecutive sessions Tuesday, weighed down by rising oil prices driven by Middle East instability and a sharp surge in US Treasury yields.

The Dow Jones Industrial Average fell 116.38 points, or 0.22 percent, to close at 53,343.40.

The S&P 500 lost 53.30 points, or 0.69 percent, to finish at 7,691.76, while the tech-heavy NASDAQ Composite dropped 355.20 points, or 1.33 percent, to 26,289.71.

A major driver was the collapse of efforts to extend a US-Iran truce agreement, which amplified inflationary pressures alongside rising oil prices.

That triggered a sell-off in US Treasuries, sending yields sharply higher. The 30-year Treasury yield climbed as high as 5.33 percent during trading — its highest level since 2007, a span of 19 years.

The benchmark 10-year Treasury yield also hovered around 4.71 percent, near its highest level since January 2005.

Oil prices rose for a third straight session. Brent crude for October delivery settled at $91.02 per barrel, up 0.17 percent, while West Texas Intermediate for September delivery gained 0.52 percent to $84.95 per barrel.

Both benchmarks closed at their highest levels since July 24.

AI and semiconductor stocks bore the brunt of the selloff. Micron Technology fell 7.06 percent, SanDisk dropped 8.89 percent, and Western Digital lost 7.43 percent.

SK hynix's American depositary receipts also fell 9.20 percent, and the Philadelphia Semiconductor Index dropped 4.98 percent.

Home improvement retailer Home Depot reported earnings that beat market expectations but kept its full-year outlook unchanged, leaving its share price with only a modest 0.20 percent gain.

As money rotated out of technology stocks into defensive plays, healthcare and biotech sectors outperformed.

Johnson & Johnson rose 3.33 percent to close at an all-time high, bringing its gain for this year to about 31 percent.

Burns McKinney of NFJ Investment Group compared the chain reaction — from the breakdown of US-Iran negotiations to higher oil prices, rising inflation expectations and surging Treasury yields — to a "domino effect," saying that "every time Treasury yields rise, technology stocks tend to take a particularly hard hit."

Markets are watching Wednesday's release of the Federal Reserve's July Federal Open Market Committee minutes and upcoming corporate earnings reports.

Alongside results from major retailers including Walmart, Nvidia's earnings announcement next week is seen as a key test of the AI-driven momentum that has powered markets this year.

Kim Byung-yeon, an analyst at NH Investment Securities, said the interest rate sensitivity of financial markets — long overshadowed by AI-driven growth — has risen compared with the past. "However, long-term US Treasury yields are likely to stabilize at lower levels, and given Donald Trump's strategic shifts, military tensions in the Middle East are also likely to gradually ease," he added.