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The stock market is under some selling pressure this morning. It is nothing extreme, but the equity futures market has a negative bias grounded in deficit and inflation concerns.
Currently, the S&P 500 futures are down 38 points and are trading 0.6% below fair value, the Nasdaq 100 futures are down 140 points and are trading 0.6% below fair value, and the Dow Jones Industrial Average futures are down 362 points and are trading 0.8% below fair value. The U.S. Dollar Index is down 0.4% to 99.68.
The deficit and inflation concerns are palpitating in the Treasury market, where the yield on the 10-yr note has again pushed above 4.50% (currently 4.54%) and the yield on the 30-yr bond has again pushed above 5.00% (currently 5.02%).
Those moves follow an April CPI report out of the UK that revealed an acceleration in the inflation rate to 3.5% year-over-year from 2.6% in March, and press reports suggesting an agreement has been struck to raise the SALT cap to $40,000 (from $10,000 and the initial $30,000 proposal) and that conservative GOP members have dropped their demands for larger Medicaid cuts.
The bump in yields has put some pressure on equities, along with a disappointing earnings report and outlook from Target (TGT), a pullback in Palo Alto Networks (PANW) after it only provided in-line guidance for its fiscal Q4 (Jul), and another hit to UnitedHealth Group (UNH), which is down after a Guardian report contained allegations that it paid nursing homes to reduce hospital transfers. UnitedHealth decried the report, clarifying that the DOJ did not pursue this matter after a multi-year probe into the evidence.
In related news, HSBC downgraded UNH to Reduce from Hold. Shares of UNH are down 5.2% in pre-market trading.
Home improvement retailer Lowe's (LOW) is up 1.4% after its earnings report, and homebuilder Toll Brothers (TOL) is up 2.3% after its earnings report, helping to offset losses elsewhere but not enough to swing the futures trade that is being dictated by interest rate movements.
The Treasury market will garner added attention at 1:00 p.m. ET today when the results of the $16 billion 20-yr note auction are released.
There is no further U.S. economic data of note today, but earlier it was reported that the MBA's Mortgage Applications Index declined 5.1% week-over-week, with purchase applications and refinance applications both down 5%, as demand weakened in the face of mortgage rates rising to their highest level since February.
