Stock Market Update

[BRIEFING.COM] The stock market hit a wall today, and it didn't have so much to do with the disappointing earnings report and outlook from Target (TGT 93.01, -5.11, -5.2%) as it did with the concerning movement in Treasury yields.

The 10-yr note yield settled the cash session at 4.60%, up 12 basis points, while the 30-yr bond yield settled the day at 5.09%, up 13 basis points. The selling interest in the Treasury market was precipitated initially by inflation angst after the UK printed a hotter-than-expected CPI number for April and deficit angst. Press reports highlighted an agreement to raise the SALT deduction cap to $40,000 (from $10,000) and noted that conservative House GOP members were dropping their demands for larger cuts to Medicaid.

It is unclear at this point if the latter is the case, as the debate within the GOP continues as of this writing. There has been a suggestion, though, that the House may press ahead with a full vote on the reconciliation bill as early as tonight.

Treasury yields took another turn for the worse in the afternoon following a $16 billion 20-yr bond auction that saw some relatively soft dollar demand, evidenced by a 2.46 bid-to-cover ratio that fell short of the prior 12-auction average of 2.58. The high yield of 5.047% at the auction tailed the when-issued yield of 5.035% by more than a basis point.

The major indices, which had been vacillating with relatively modest changes, saw selling interest pick up and bids fall by the wayside after the auction. The spike in yields triggered renewed growth concerns that hit the small-cap Russell 2000 (-2.8%) the hardest and that ultimately contributed to losses in 10 of the 11 S&P 500 sectors.

The lone holdout was the communication services sector (+0.7%), which garnered support from Alphabet's (GOOG 170.06, +4.74, +2.9%) outperformance following its I/O event. 

The real estate (-2.6%), health care (-2.4%), financials (-2.1%), consumer discretionary (-1.9%), and utilities (-1.9%) sectors were the biggest losers.

Market internals showed decliners outpacing advancers by a nearly 9-to-1 margin at the NYSE and by a 4-to-1 margin at the Nasdaq. Dow component UnitedHealth Group (UNH 302.98, -18.60, -5.8%) was among the decliners, pressured by an HSBC downgrade to Reduce from Hold and a report in The Guardian that chronicled allegations of the company paying nursing homes to reduce transfers between hospitals. UnitedHealth denounced the report, saying the DOJ investigated the allegations and declined to pursue the matter due to its finding of significant factual inaccuracies in the allegations.

Still, that didn't help the managed care company's stock, which joined many others today on the losing end of things. The major indices closed just off their worst levels of the session.

The only economic data out this morning was the MBA Mortgage Applications Index. It was down 5.1% week-over-week, with refinance applications and purchase applications both down 5.0% as demand weakened with rising mortgage rates.

• DJIA: -1.6% YTD
• S&P 500: -0.6% YTD
• Nasdaq Composite: -2.3% YTD
• S&P Midcap 400: -4.3% YTD
• Russell 2000: -8.2%