Long-term Treasury yields surged to kick off the week as Moody’s US credit downgrade reignited market concerns over the country’s worsening fiscal trajectory.

On Monday, the 30-year yield (^TYX) briefly broke above the closely watched 5% threshold, the highest level since 2023, before retreating to around 4.94% as the bond market ultimately appeared to shrug off the downgrade amid a broader reassessment of fiscal risk.

But long-term yields ticked up again on Tuesday, hovering near 4.97%. Wall Street analysts say the volatility reflects a shift in investor sentiment as recent optimism around trade developments gives way to renewed concern over the nation’s ballooning debt.

While markets initially brushed off the downgrade, analysts warn the bond market isn't out of the woods yet as fiscal uncertainty and persistent inflation pressures will likely fuel further turbulence in long-run Treasurys.

Citi analysts noted that fiscal space is narrowing, meaning the government has less leeway to increase spending without worsening its debt outlook, due to reduced tariff revenues. At the same time, the potential for a major fiscal impulse is growing under President Trump’s proposed "Big Beautiful Bill."

Trump’s tax proposal, still in its early stages in Congress, calls for sweeping cuts to individual and corporate tax rates, which would raise the nation's debt ceiling by $4 trillion. Republican leaders are aiming for a vote in the House of Representatives before Memorial Day.

"We have expected a narrative shift could take place from positive tariff news to negative budget/fiscal issues, which can see another round of 'sell the US': higher back-end yields [or long-term interest rates], lower risk assets, and lower US dollar," Citi analyst Daniel Tobon wrote in a note to clients on Monday.

He warned that a sustained move above the 5% level on the 30-year Treasury yield could trigger a broader repricing of fiscal risk, with ripple effects on the dollar and global risk assets.

Yahoo Finance's Claire Boston reports:

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After a massive drawdown in the initial reaction to President Trump's April 2 tariffs, major stock indexes have roared back.

But following six straight days of gains that have brought the S&P 500 within 3% of a new all-time high, some on Wall Street are cautioning that the next move in markets might not be definitively higher.

"I do think there is some complacency [in markets]," Charles Schwab chief investment strategist Liz Ann Sonders told Yahoo Finance.

Sonders pointed out that at the bottom of the drawdown, investor sentiment hit historically low levels. Since then, market sentiment has taken a U-turn, and a large tech rally, including in some more speculative names, has helped lead the market's return.

"We may be at that point where the setup, from a sentiment perspective, suggests that the market could have some downside if we get a negative catalyst," Sonders said. "And that's really the best way to think about this market. It's hard to judge it based on what policy announcements are going to be and when they're going to come. That's a fool's errand."

Trump's tariff walkback has been at the forefront of the recent surge in stocks. Last week, the 90-day tariff pause between the US and China prompted several Wall Street strategists to boost their year-end targets for the S&P 500 in 2025 while economists scaled back their probabilities of a recession for the US economy.

Still, consumer sentiment surveys remain at their lowest levels on record, and fears that tariffs could boost inflation and slow economic growth haven't fully left the picture.

"Equity markets have reacted with unwarranted optimism, overlooking the persistent economic drag posed by elevated tariffs," EY chief economist Gregory Daco wrote in a note to clients.

Daco lowered his odds of a US recession in the next 12 months to 35% from a prior projection of 45% prior to the delay of tariffs on China. Still, he sees US economic growth approaching "stall speed" by the fourth quarter, with GDP rising just 0.6% compared to the year prior in the final three months of 2025.

"While the near-term outlook is more constructive, risks remain tilted to the downside," Daco said.

With the S&P 500 just 3% from notching a new record close, a slew of individual stocks are already hitting new highs.

Uber (UBER) joined that list on Monday and extended further to new highs on Tuesday. Other S&P 500 members, including Netflix (NFLX), IBM (IBM), Visa (V), Mastercard (MA), and Booking Holdings (BKNG) all also closed Monday at a record high.

Elon Musk isn't going anywhere at Tesla (TSLA).

The Tesla CEO, who had been under pressure earlier this year as he expanded his work with the Department of Government Efficiency (DOGE), said on Tuesday he's committed to being Tesla's chief executive for the next five years.

"Unless I die," Musk added on Tuesday at an economic forum in Qatar.

Tesla shares are up more than 43% in the past month as investors have poured back into the name following Musk's walkback from his government involvement.

US stocks fell on Tuesday, with the tech-heavy Nasdaq leading the declines as investors reassessed the recent market rally.

The Dow Jones Industrial Average (^DJI) traded below the flat line while the S&P 500 (^GSPC) dropped roughly 0.3% on the heels of a sixth straight day of gains for the benchmark index. The tech-heavy Nasdaq Composite (^IXIC) backed off around 0.4%, leading the way to the downside.

Bitcoin (BTC-USD) gained 2% to trade above the $104,000 level as a crypto industry push for stablecoin legislation cleared a key hurdle on Monday night.

Cryptocurrencies rose broadly after a bill to regulate stablecoins passed a procedural vote in the Senate. The bill still faces some opposition as it advances to the next stage, in which senators will have the option to offer amendments.

Yahoo Finance's Jennifer Schonberger reports that the legislation that advanced in the Senate Monday night holds stablecoin issuers to strict reserve requirements, requiring them to maintain one-to-one reserves in cash and cash equivalents. It also bans unbacked, algorithmic stablecoins.

Meanwhile, crypto became even more enmeshed in the global financial system after Coinbase (COIN), $60 billion crypto exchange, joined the S&P 500 (^GSPC) yesterday. In today's Morning Brief, Yahoo Finance's Hamza Shaban details how the move signals a growing sense of legitimacy and security around crypto amid a shaky year for traditional assets. You can read more about that here.

Coinbase stock rose 1% in premarket trading.

After Walmart (WMT) got blasted by President Trump on Saturday for saying it would raise prices because of tariffs, Home Depot (HD) is spinning a different narrative.

Shocker, I know.

Home Depot's CFO Richard McPhail said on a competing news outfit that the company will not be raising prices due to tariffs.

I don't buy it at all. If Walmart — the world's largest retailer is raising prices because of tariffs (as its CFO John David Rainey told me last week) — you best believe price hikes are coming to some departments of Home Depot this spring and summer. And with it, some negative hit to sales.

I followed up with a Home Depot spokesperson on this one by email. I asked them point blank how they can possibly hold prices against the backdrop of tariffs.

Here is their response:

Shares in UnitedHealth were set to build on the previous session's rebound, up 2% in premarket trading even as the company continues to grapply with an abrupt leadership change and a report of a criminal fraud probe.

The health insurer's stock jumped over 8% on Monday after an SEC filing showed its returning CEO Stephen Hemsley and other company insiders bought a chunk of shares. UnitedHealth's stock slumped to a five-year low last week amid the negative headlines.

Home Depot (HD) stock popped over 2% after the home improvement retailer reported earnings and reaffirmed financial guidance for 2025.

Yahoo Finance's Brooke DiPalma reports:

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Is it time to "Sell America"? Wall Street strategists are offering up more fuel for the debate, as investors gauge the economic drag of tariffs and inflation on the economy.

Some strategists are betting that stocks in Europe will outperform their US counterparts this year by the most in at least two decades, Bloomberg reports:

Read more here.

Contemporary Amperex Technology Co.'s stock (3750.HK) jumped 14% on its Hong Kong trading debut, in the world's biggest listing of 2025.

Shares in the Chinese battery giant — a key supplier to Tesla (TSLA) — closed at $306.20 apiece, compared with the subscription price of $236. CATL raised $4.6 billion in its offering in the face of a Pentagon blacklisting and trade tensions.

Bloomberg reports:

Read more here.