Trouble never comes alone. Just as the S&P 500 lifted its head after markets repriced the midterm results, a new shock hit equities. The fastest rally in 2-year Treasury yields since Donald Trump's tariff shock on America's Liberation Day in April 2025 prompted a retreat in US stock indices. That move reflected accelerating inflation and a hawkish turn in FOMC rhetoric.

US Treasury yield dynamics

The economy is cyclical. Rises are followed by falls and then new climbs. Some argue that Fed tightening leads to a recession — by raising rates, the Fed effectively removes the punch bowl during the feast. Signs of US overheating are appearing. Following a strong labor market, inflation has accelerated. FOMC member Christopher Waller believes that fighting it requires a 50-bp federal-funds increase in December rather than 25 bp. His colleague Lori Logan says borrowing costs should be raised to 4.5% as quickly as possible.

If the market faces not one or two but three or four tightening moves, 10-year Treasury yields could return to multi-year highs. That would worsen the fundamental case for equities and create problems for hyperscalers that are aggressively raising capital to finance AI projects. AI fears, which had eased somewhat after markets repriced the political consequences of Democrats' midterm wins, could flare up again.

Meanwhile, the sell-off in NVIDIA shares over the spy scandal continues. The company's market cap has fallen by $430 billion since rumors about the CEO's affair surfaced. Market value dipped to about $4.07 trillion, and Microsoft briefly passed it. Subsequent declines reduced the chipmaker's market cap to roughly $3.96 trillion; it still ranks third globally after Apple and Microsoft.

Magnificent Seven market cap dynamics

Pressure on the S&P 500 is also coming from the anticipated Anthropic IPO. The company is targeting a market value of $1.4 trillion — a figure many market participants regard as lofty. Pre-IPO liquidity withdrawal is a headwind for equity indices.

An even bigger problem would be weak demand for the Claude issuer's shares. The IPO serves as a litmus test for investors: its success or failure will help clarify whether the AI tech boom endures or is already fading.

Technically, the daily S&P 500 chart shows an inside bar, signaling uncertainty. A break above the high at 7,545 would justify adding to earlier long positions. Conversely, a drop below the low at 7,470 would be a trigger to sell.