US Stocks Slide as Bond Sell-Off, Trade War Fears and AI Stock Rotation Rattle Markets

Global markets opened the week under heavy pressure as rising bond yields, renewed US-EU trade tensions, and a sharp rotation out of AI-linked equities unsettled investors just as earnings season begins.

US Treasury yields climbed to their highest levels in four months, driven in part by a sharp sell-off in Japanese government bonds that spilled over into global debt markets. The surge in yields added pressure on equities, reinforcing concerns that tighter financial conditions could weigh on economic growth.

Dollar Weakens as ‘Sell America’ Trade Returns

In currency markets, the US dollar slipped to a two-week low, with investors reviving the so-called “Sell America” trade amid rising geopolitical and trade risks. The weaker dollar fuelled strong demand for safe-haven assets, sending gold and silver prices to fresh record highs as investors sought protection from market volatility.

The renewed flight to safety highlights growing unease around global trade, inflation risks, and the outlook for monetary policy.

Big Tech Slides as Investors Rotate Out of AI Stocks

US equities suffered broad-based losses, with Big Tech leading the downturn. Shares of Nvidia (NVDA) and Broadcom (AVGO) fell sharply as investors rotated out of AI-related stocks, reigniting concerns that parts of the technology sector may be overheated after months of strong gains.

The pullback in AI-linked equities suggests markets are becoming more sensitive to valuation risks, particularly as borrowing costs remain elevated and earnings expectations face closer scrutiny.

Trade War Tensions Escalate Between US and Europe

Market anxiety intensified following a series of trade threats from US President Donald Trump over the weekend. Trump warned that eight NATO countries could face additional 10% import duties unless the US secured a deal involving the purchase of the Danish territory of Greenland.

On Monday, Trump doubled down on his stance, even as the European Union discussed potential $108 billion in retaliatory tariffs. EU officials also signalled they could deploy an “anti-coercion instrument,” a move that analysts estimate could put up to $8 trillion of US assets at risk.

Further escalating tensions, Trump threatened to impose a 200% tariff on French wine after French President Emmanuel Macron declined an invitation to join Trump’s proposed “Board of Peace.”

European Commission President Ursula von der Leyen responded by warning that the EU’s reaction would be “unflinching, united, and proportional,” keeping markets on edge. Meanwhile, Greenland’s prime minister urged citizens to prepare for the possibility of an invasion, adding another layer of geopolitical uncertainty.

Wall Street Suffers Heavy Losses

US stocks posted steep declines on Tuesday as trade-war fears and the global bond sell-off reverberated through markets.

• The Dow Jones Industrial Average fell 1.7%, shedding more than 800 points

• The S&P 500 dropped 2.1%

• The Nasdaq Composite slid over 2.4%, marking a sharp retreat from recent highs

The sell-off followed an already difficult week for Wall Street, with investors pulling back from riskier assets amid rising yields and growing geopolitical risks.

Outlook: Volatility Ahead as Earnings Season Begins

With earnings season getting underway, investors face a rocky return to trading, as corporate results now compete with trade policy uncertainty, bond market volatility, and geopolitical tensions for market attention.

Until clarity emerges on US-EU relations and global interest rate expectations, analysts warn that market volatility is likely to remain elevated, particularly for growth stocks and speculative sectors such as AI and crypto-related equities.